A growing number of salaried taxpayers expecting refunds for Assessment Year (AY) 2025–26 are experiencing delays in the processing of their income tax returns. The Income Tax Department has temporarily halted refunds in cases where claimed exemptions do not match salary details reported by employers in Form 16.
Why Refunds Are on Hold
The delay stems from discrepancies detected between the exemptions claimed in taxpayers’ Income Tax Returns (ITRs) and the figures reported in Form 16 (Annexure II). Taxpayers who have claimed unusually high refunds are being flagged for scrutiny through the department’s internal risk checks.
Emails sent directly to taxpayers indicate a “significant mismatch” between claimed exemptions and Form 16 details. The department notes that such inconsistencies can inflate refund amounts, prompting a temporary pause in processing.
Refunds Are Paused, Not Cancelled
Experts emphasize that refund processing has been paused rather than rejected. Once the mismatch is clarified or corrected, refunds will proceed.
“In case of any mismatch between the details furnished in ITR and financial data received by the tax department, an automated email or SMS is sent to taxpayers,” explained Gopal Bohra, Partner – Tax.
Taxpayers are advised to verify that all claimed exemptions, such as House Rent Allowance (HRA), Leave Travel Allowance (LTA), and other deductions, are supported by documentation and reflected in Form 16. Benefits claimed at filing but not backed by Form 16 are a common trigger for review.
The email also includes a caution: ignoring it could be interpreted as deliberate inaction, increasing the likelihood of detailed scrutiny later.
“Every notice from the Tax Department should not be feared. The objective is to encourage voluntary compliance so that penalty provisions do not apply. Justified claims need not be reversed. The goal is to make the assessee aware of potential penalties,” said Ashok Mehta, CA and Managing Council Member of The Chamber of Tax Consultants.
Importance of the Revised Return Deadline
The department has set December 31, 2025, as the final date to file a revised return for AY 2025–26. Taxpayers who identify errors can correct them within this period without incurring additional tax liabilities beyond what is already payable.
Those who have already filed a revised return addressing discrepancies can safely ignore the email.
Why Are These Checks Happening Now?
According to Mehul Sheth, CA and Secretary of The Chamber of Tax Consultants, “There can be multiple reasons, both genuine or otherwise. In a way, this provides taxpayers an opportunity to review the income tax return they filed.”
Steps Taxpayers Should Take
If you receive such an email:
- Log into the e-filing portal and compare your ITR line by line with Form 16 and Form 26AS.
- Verify supporting documents for claimed exemptions.
- Decide on action: If your claims are valid and documented, no immediate correction may be needed. Otherwise, filing a revised return promptly is advisable.
Mehul Sheth advises, “Failure to file a revised return by December 31, 2025, will require mandatory filing from January 1, 2026, and may attract penalties in certain situations. Hence, the email should be seen as a positive initiative by the Income Tax Department.”
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