Income Tax Refund Delay: Incorrect 80G Claim Pushes Tax Refund Into Delay

The tax department did not release a filer’s refund this season after finding that a deduction taken under Section 80G didn’t qualify. The mistake wasn’t dramatic; it was one line in the return involving a donation. But it was enough to freeze the refund until a revised return was filed, according to a recent report by Upstox.

What happened was straightforward. The filer had entered a deduction of Rs 44,734 toward charitable donations. Later, it turned out that the organisation receiving the contribution did not fall under the category eligible for Section 80G benefits. With automated checks running through returns almost instantly, the system marked the line item for review, and the refund stopped moving.

At that point, the filer believed a refund of Rs 33,470 was on its way. Tax professionals then examined the mismatch and suggested amending the return. Once the deduction was removed and numbers recalculated, the refund fell to Rs 18,120. Only after that revision did the Income Tax Department clear the return for refund release.

The situation says less about charitable giving and more about how refunds are handled now. The department no longer waits for paper correspondence or notices for every discrepancy. Returns with refund claims are screened through data filters that compare entries, receipts, and eligibility criteria. When a mismatch shows up, intent isn’t discussed; the number simply doesn’t pass.

Donation Breaks: Conditional, Not Automatic

Section 80G is narrower than public perception. Money given to a cause or an organisation doesn’t automatically qualify for a tax deduction. The institution must be registered under the correct provisions, the receipt must be formatted properly, and the percentage claimable varies from fund to fund. Some are eligible for full deduction, others for half. So the first test is not generosity; it is compliance.

Occasional donors often miss this detail. If the charity is well-known, people assume the tax break follows. But the tax break follows paperwork, not popularity. In this case, nothing suggested malice or exaggeration. It was just an assumption that didn’t match the law.

What This Means Before The 2026 Filing Rush

Advisers watching refund patterns say the 2026 season will likely bring more screenings like this. Refund volumes have gone up, and technology has replaced discretion with filters. The fastest refunds tend to be the cleanest ones, not necessarily the earliest ones.

One point repeatedly made by tax professionals is that corrections are now easier. A revised return solves most of these issues faster than waiting for a formal query. The only hurdle is awareness: people have to notice the mistake before the system notices it for them.

If anything, this case captures a shift in the refund mindset. Filing early no longer guarantees speed. Filing accurately does.