Parliamentary committee flags rising delays in income tax refunds
New Delhi, Mar 12, 2026
Finance panel notes rising delays in income tax refunds beyond the 90-day norm and flags a surge in outstanding direct tax arrears
Nearly 27 lakh income tax refund applications were processed with delays beyond the normative 90-day period during the current financial year 2025–26, according to a parliamentary report tabled on Thursday.
The Standing Committee on Finance, in its 30th Report on Demands for Grants (2026–27), noted that in 2023–24 around 12.7 lakh refund cases were delayed beyond 90 days, which increased to 17.1 lakh in 2024–25. “The Committee acknowledge the rationale provided by the Chairman, CBDT that deeper scrutiny was necessitated by investigations into widespread fraudulent claims such as bogus 80G donations,” the report states. It added that the average processing time rose to 35 days in 2025–26 (up to January 31), from 24–25 days in prior years, with 3.38 crore refunds issued totalling Rs 1.62 lakh crore.
Explaining the delays, the Chairman, CBDT, told the committee: “Relating to the higher time that we have taken insofar as issuance of refunds is concerned. This year, it so happened that in July 2025, similar to the case that we referred to — that is, the Biryani case — verifications were carried out by the tax department in respect of bogus deductions claimed, donations, 80G, and so on.” He noted that over 50 lakh updated and revised returns led to voluntary reductions in refund claims by Rs 2,000 crore, emphasising a “new approach” of nudging compliance without litigation.
With regard to tax arrears, the report revealed a staggering Rs 47.42 lakh crore in outstanding direct tax demands as of January 31, 2026, with 76 per cent (Rs 36.27 lakh crore) classified as “uncollectible” due to untraceable assessees, insolvency, or lack of assets. “These astronomical arrears are locked up due to practical constraints such as assessees being untraceable, companies undergoing liquidation or insolvency, and a lack of attachable assets,” the department submitted to the panel.
The panel criticised piecemeal write-offs of small demands (1.12 crore entries up to Rs 1,000, totalling Rs 611 crore) as insufficient, recommending “the constitution of an inter-departmental task force to undertake a comprehensive assessment and to recommend appropriate framework to address the long-pending uncollectible demands.”
[The Business Standard]
