Income tax refunds delayed after deductions and exemptions triggered automated scrutiny.
Data mismatches with Form 16, TDS, and bank records flagged returns.
Flagged returns remain under verification, pushing refunds beyond normal timelines.
Taxpayers can respond, revise returns, or wait for checks to conclude.
Income tax refunds of many taxpayers have been put on hold after the Income Tax Department flagged discrepancies in deductions and exemptions claimed in their returns, according to a recent report by The Times of India.
The issue has come to light after a wave of automated emails and text messages landed in taxpayers’ inboxes, warning them that their income tax returns are under scrutiny and processing has been paused.
1 December 2025
Get the latest issue of Outlook Money
The alerts, sent by the department’s systems, have caught many taxpayers off guard. Several recipients said the messages were vague, offering little clarity on what exactly was wrong with their returns or whether any immediate action was required. For most taxpayers, the immediate worry is whether their refunds will now take longer than usual to come through.
Chartered accountants say the volume of such alerts has increased in recent weeks, particularly affecting salaried individuals and taxpayers who have claimed higher deductions or exemptions. In most cases, the returns have not been rejected but have been kept on hold as part of a risk assessment exercise.
Data Matching Behind The Scrutiny
The current exercise is part of the tax department’s wider push to rely more heavily on data analytics to verify returns. Claims made in income tax returns are being matched against information already available with the department, including salary details provided by employers, tax deducted at source records, and data reported by banks and other institutions.
Where the figures don’t match what the department already has on record, the return is set aside for checking. For instance, deductions claimed under various sections may not appear in Form 16 issued by the employer, or donation claims may not match records submitted by charitable organisations. Even when the claims are genuine, such differences can trigger an automated alert.
Tax professionals point out that this does not necessarily mean the taxpayer has done anything wrong. Many deductions are routinely claimed at the time of filing the return because employers may not have considered them while computing the monthly TDS. The messages, however, rarely spell this out, leaving many taxpayers worried about what comes next.
Refund Delays Add To confusion
For taxpayers whose returns have been picked up, refunds are simply taking longer. Once a return is flagged, processing stops until the issue is looked at, pushing payouts beyond the usual timelines.
Several taxpayers have reported that their return status simply shows “processing” or “under verification,” with no further explanation. This has led to concerns that refunds could be delayed well into the next financial year if the issue is not resolved quickly.
Experts say taxpayers should regularly check the income tax portal for any follow-up communication from the department. In some cases, the department may ask for clarification or additional information. If a mistake has crept in, taxpayers still have the option of correcting it by filing a revised return within the deadline.
What Taxpayers Should Keep In Mind
Tax experts say these messages should not be read as a warning of penalties or formal notices. In many cases, the matter settles once the department finishes its internal checks. Even so, taxpayers are being advised to keep records of their investments and deduction claims handy in case details are sought later.
With tax scrutiny increasingly driven by data and automated matching, such delays may show up more often. While the intent is to tighten verification, clearer communication could help calm nerves among taxpayers waiting for their refunds.
