Since the government has rolled out the new fraud detection measure to curb the bogus or inflated refund claims, the income tax refunds of India have been reduced this year.
As per the official data, between April and October 2025, there is a fall in the refunds issued by approximately 16% year-on-year, slipping from about Rs 2.4 lakh crore in the previous year to roughly Rs 2.0 lakh crore this fiscal.
For non-corporate taxpayers, the impact has been more pronounced, their income tax refunds having halved from over Rs 1.2 lakh crore last year to just around Rs 62,000 crore this year.
What is the reason for the late refunds?
The drop is not because of the sluggish processing, but instead a new layer of automated verification rolled out by the Income Tax Department’s Central Processing Centre (CPC).
Risk-based algorithms have been used by these enhanced checks to specify the bogus refund claims, particularly for those exceeding the specified limits. Each specified case undergoes additional scrutiny to ensure authenticity and prevent misuse of the system.
As per the officials, the move was important post fetching a surge in the bogus refund claims submitted via manipulated income declarations and forged TDS data.
Tax Revenue Collections Stay Robust
Refunds have decreased, while net direct tax collections have increased by approximately 6.3%, totalling Rs 11.9 lakh crore for this fiscal year. Gross direct tax collections also saw a slight rise, reaching Rs 13.9 lakh crore. This suggests that stricter controls on refunds have led to improved revenue efficiency.
As per the official, the objective of the government is to balance the quicker processing with bogus prevention, ensuring that genuine taxpayers still get their refunds without undue delay.
What taxpayers do
- Genuine taxpayers can encounter slight delays, but the process is made to safeguard against fake claims.
- Tax experts suggest that taxpayers should confirm precise reporting of income and TDS details to prevent refund mismatches.
- Refund claims exceeding a specific limit are subject to additional scrutiny in the new system.
In summary
The Income Tax Department’s recent action highlights the government’s focus on transparency, accountability, and a technology-driven approach to tax administration. While the immediate effect may lead to delayed refunds, experts believe this measure will ultimately enhance trust and integrity within India’s tax system.
