Why Many People Are Having Trouble Getting Their Income Tax Refunds And Worry About December 31 Deadline

The Income Tax Department has pointed out a few reasons for the increase in text messages and emails sent to taxpayers this month, including ineligible claims for deductions and exemptions, as well as a significant discrepancy between the information reported in income tax returns and the data from reporting entities

These messages and emails are part of the Income Tax Department’s campaign called ‘NUDGE’, which stands for Non-Intrusive Usage of Data to Guide and Enable.

They’re urging taxpayers to submit revised returns by the December 31 deadline.

This has sparked frustration among taxpayers on social media, with many complaining that their refunds have been delayed for over six months.

Typically, according to the Income Tax Department’s own statements on their website, it should take about 4-5 weeks for a refund to be credited to a taxpayer’s account.

Based on this timeline, most refunds should have been processed by the end of October, especially since the filing deadline for individuals and non-audit cases was September 16.

Individuals make up nearly 95% of all returns filed.

A tax refund is issued when the taxes paid exceed the actual amount owed, taking into account TDS, TCS, advance tax, or self-assessment tax after all deductions and exemptions are applied.

The Income Tax Department has identified certain taxpayers through their ‘risk management framework’ who are claiming ‘ineligible refunds’ through deductions or exemptions they aren’t entitled to. This has led to what the Department describes as understatement of income.

The I-T Department has highlighted some significant mismatches:

1)’Bogus’donations to registered unrecognised political parties (RUPPs), with some donees having incorrect PANs.

2)Discrepancies between tax deducted at source (TDS) and the Annual Information Statement (AIS) showing higher income.

3)Large deductions or ineligible claims.

4)Failure to disclose foreign assets or income.

Earlier, on December 13, the Central Board of Direct Taxes (CBDT), which oversees the IT Department, pointed out that it took action against several intermediaries who were filing income tax returns with fake claims for deductions and exemptions.

“The investigation showed that some intermediaries had set up a network of agents across India to file returns with false claims for a commission”, it mentioned.

Many taxpayers received emails from the Department urging them to accurately report their foreign income and asset details and to amend their returns by December 31.

Failing to disclose foreign income could lead to penalties under The Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax, 2015.

High-value refunds, particularly those exceeding Rs 50,000, have been closely examined, and taxpayers have been voicing their frustrations about the delayed refunds since the September 16 deadline.

Many have also highlighted issues with cash flow to cover their household expenses while waiting for their refunds.

However, it’s the wave of messages and emails sent by the Department, especially in the past two weeks, that has caused anxiety among taxpayers.

The worry is that discrepancies have been pointed out with only 10 days left until the revised return filing deadline of December 31.

On Monday night, numerous taxpayers with pending refunds reported receiving SMS from the I-T Department, without any follow-up email, unlike previous cases.

The SMS read: “…processing of the said return was held as it was identified under risk management process on account of certain discrepancies in the claim of refund. An email with details has also been sent to your registered email address…”

Many taxpayers were left in the dark about how to respond to such communications since they weren’t informed about the specific issues with their tax returns, especially since they hadn’t received any emails.

This led a lot of them to call the Department’s helpline to voice their concerns about their returns not being processed, with many saying that the helplines are currently hard to reach.

The main issue here is the significant deductions being claimed, which are mainly permitted under the old tax regime.

Tax authorities are starting to wonder if there should be a cutoff date for the old tax regime to prevent such large deductions, which in some cases turn out to be fraudulent.

On the flip side, taxpayers have taken to social media to argue that salaried individuals have limited opportunities to dodge taxes and that steps should be taken to expand the taxpayer base instead.

The I-T Department mentioned that the NUDGE campaign utilized advanced data analytics. They described it as a ‘trust-first approach’, stating that taxpayers are being given a chance to review their ITRs and ‘voluntarily correct’ any ineligible claims if necessary.

Taxpayers with legitimate deduction or exemption claims that are correctly filed according to the law don’t need to take any further action, they noted.

Tax authorities have started issuing refunds, which should begin to appear in the next ten days, even though they are closely examining high-value refunds.

Taxpayers who miss the December 31 deadline can still submit an updated return starting January 1, 2026, according to the Department, but they will need to pay any additional tax owed.

So far, over 15 lakh income tax returns have been revised for AY 2025-26, as reported by the Department. For context, 25.8 lakh revised ITRs were submitted for AY 2024-25.

Additionally, over 21 lakh taxpayers have updated their ITRs for assessment years 2021-22 to 2024-25 and have paid more than Rs 2,500 crore in taxes during this financial year, they added.

Taxpayers are currently asking for an extension on the December 31 deadline for filing revised returns.

A lot of tax professionals have also told their clients not to stress if they’ve only gotten the SMS and not the email regarding discrepancies from the I-T Department.

They mentioned that filing a revised return is necessary if there’s been a mistake in reporting income or if incorrect deductions have been claimed.

You can file a revised return up to three months before the assessment year ends, which is December 31.

Taxpayers can submit an updated return (ITR-U) within 48 months after the assessment year ends (this was increased from 24 months in the Finance Act, 2025).

You can even file an updated return if you didn’t file one before. If you file the updated return between 24-36 months after the end of the relevant assessment year, you’ll owe an extra 60 percent of the total tax and interest on the additional income.

For ITR-U filed 36-48 months after the assessment year, the additional tax payable is 70 percent of the total tax and interest.