Income Tax Refund Delay: Tracking, Causes and Section 244A Interest

Income Tax Refund Delayed? Reasons, Tracking & Interest under Section 244A — AY 2026-27

Every filing season, a good share of my client calls in August and September begin the same way: the return was filed in July, the intimation showed a refund, and the money has not arrived. In almost every one of these cases, the delay turns out to have a specific, identifiable cause — and most of them are fixable by the taxpayer from the e-filing portal itself, without writing a single letter to the department.

This article sets out where refunds actually get stuck for AY 2026-27, how to trace the exact stage of the hold-up, and when the department owes you interest under Section 244A of the Income-tax Act, 1961.

One point of context before we begin, because it is causing genuine confusion this year. Although the Income-tax Act, 2025 has come into force from 1st April 2026, the return for AY 2026-27 relates to income of FY 2025-26 and is governed entirely by the Income-tax Act, 1961. Section 536(2)(c) of the new Act preserves the old Act for all proceedings relating to AY 2026-27 and earlier years. So the provisions discussed here — Sections 143(1), 244A and 245 — are the correct references for this refund season. This is the last filing cycle under the 1961 framework.

When does a refund become “due” at all?

A refund arises when the taxes already paid on your behalf — TDS, TCS, advance tax and self-assessment tax — exceed the final tax liability determined on processing of the return. Three things must happen in sequence before any money moves:

1. The return is filed and verified.
2. The Centralised Processing Centre (CPC) processes the return.
3. An intimation under Section 143(1) is issued determining the refund.

Until all three are complete, there is no refund “pending” in the legal sense — there is only a return awaiting processing. Understanding which of these three stages you are stuck at is half the diagnosis.

For AY 2026-27, the staggered due dates under Section 139(1) are worth restating, since a return filed late also delays the refund cycle: 31st July 2026 for ITR-1 and ITR-2 filers, 31st August 2026 for non-audit business and professional cases (ITR-3/ITR-4) — a new dispensation under the Finance Act, 2026 — and 31st October 2026 for audit cases.

Where refunds actually get stuck

1. Return submitted but not verified

An unverified return is, in law, no return at all. The verification window is 30 days from the date of filing. E-verification through Aadhaar OTP, net banking or a pre-validated bank account EVC takes under two minutes, yet this remains the single most common reason I see for a refund that “never came” — the return was simply never completed.

If the 30-day window has lapsed, verify immediately; the date of verification is then treated as the date of filing, with the consequences that follow for a belated return. Where genuine hardship caused the lapse, a condonation request can be filed through the portal (Services → Condonation Request), though this is discretionary relief and not a route to plan around.

2. Mismatch between the ITR and AIS / TIS / Form 26AS

CPC processing runs the return against the Annual Information Statement, the Taxpayer Information Summary and Form 26AS. The recurring culprits are familiar: savings and FD interest reported by banks but omitted from the return, dividend income, mutual fund and share transactions, and TDS figures that do not tally because a deductor filed its statement late or with errors.

A mismatch does not always mean a notice — but it does mean the return sits in a longer processing queue, and where the variance is material, a Section 143(1)(a) adjustment proposal or a defective-return notice under Section 139(9) follows.

The fix belongs before filing: reconcile AIS/TIS/26AS against your own records, use the AIS feedback mechanism for entries that are genuinely wrong, and where the return has already gone with a gap, respond to the intimation within the time allowed with documentary support. A revised return under Section 139(5) remains available for AY 2026-27 up to 31st March 2027 — the Finance Act, 2026 has extended this window from the earlier 31st December cut-off.

3. Bank account not pre-validated, or PAN inoperative

CPC releases refunds only to a pre-validated bank account with the PAN linked. Refund failures on this count arise from: an account closed or turned inoperative after filing, IFSC changes following bank mergers, name mismatch between PAN and bank records, and — increasingly — a PAN rendered inoperative for non-linkage with Aadhaar. An inoperative PAN blocks the refund outright.

Check Profile → My Bank Accounts on the portal, confirm the nominated account shows “Validated”, and if a refund has already failed, correct the details and raise a refund reissue request (Services → Refund Reissue). No physical application is needed.

4. Adjustment against an old demand — Section 245

Where any demand is outstanding for an earlier year, the department may set the current refund off against it. Two safeguards matter here, and both are routinely misunderstood:

First, the set-off is lawful only after prior intimation under Section 245. Courts have consistently set aside adjustments made without giving the assessee the written intimation and an opportunity to respond.

Second, the intimation carries a response window — check the period stated in your intimation and diarise it, because the timelines allowed in recent assessment years have been shortened. If no response is filed within the stated period, the demand (with interest) is adjusted automatically.

On receiving a Section 245 intimation: log in → Pending Actions → Response to Outstanding Demand. If the demand is correct, pay or accept the adjustment. If it is wrong — already paid, reduced by rectification, or under appeal — file the disagreement online with the challan or order reference. In my experience, a substantial number of “outstanding demands” on the portal are legacy entries that collapse the moment the payment challan is produced.

5. Risk flags and scrutiny selection

Unusually large refund claims, substantial losses, or a return pattern inconsistent with the taxpayer’s history can route the return through additional risk verification, and in some cases into scrutiny under Section 143(2) or an inquiry under Section 142(1). There is no shortcut here other than responding to every notice within the deadline through e-Proceedings — the refund follows the completion of the verification, not the other way around.

6. Plain processing delay

Sometimes everything is in order and the return is simply sitting in the CPC queue. Where a verified return has remained unprocessed for an unreasonable period, raise a grievance on the portal (Grievances tab / e-Nivaran) citing the acknowledgement number. A grievance with a specific ask — “return verified on X date, not processed” — moves faster than a general complaint.

Quick reference: reading the portal status

How to check the status

1. Log in at incometax.gov.in → e-File → Income Tax Returns → View Filed Returns → select AY 2026-27.
2. The status line tells you the stage: pending verification, under processing, processed with refund, or refund failed.
3. For post-determination payment status, use the “Know Refund Status” service, or simply watch the pre-validated bank account — the credit narration typically reads “ITRO” or similar.

Interest on delayed refunds — Section 244A

The department does not hold your money free of cost. Section 244A grants simple interest at 0.5% per month or part of a month on the refund, and the entitlement is statutory, not discretionary. The mechanics:

• Refund out of TDS, TCS or advance tax — Section 244A(1)(a): interest runs from 1st April of the assessment year to the date of grant of refund, provided the return was filed by the due date. For a belated return, interest runs only from the date of filing.
• Refund of self-assessment tax and other payments — interest runs from the date of payment of tax (or filing of return, as applicable) to the date of grant.
• 10% threshold: no interest is payable where the refund is less than 10% of the tax determined under Section 143(1) or on regular assessment.
• Delay attributable to the taxpayer — Section 244A(2): the period of delay caused by the assessee (late verification, non-response to notices) is excluded from the interest computation.
• Additional 3% per annum — Section 244A(1A): where a refund arises from an appeal-effect order and is not granted within three months from the end of the month of the order, additional interest of 3% p.a. runs for the further delay.

Illustration. Refund of ₹40,000 determined for AY 2026-27, return filed within the due date, refund granted in February 2027 — interest runs April 2026 to February 2027 (11 months, part of a month counting as full): ₹40,000 × 0.5% × 11 = ₹2,200, granted along with the refund in the intimation itself.

One point that surprises clients every year: while the refund itself is merely your own money coming back, the Section 244A interest is taxable as income from other sources in the year of receipt. Pick it up from the intimation and report it in the next return — it appears in AIS, and omitting it invites precisely the mismatch this article began with.

The prevention checklist

The pattern across everything above is that refund delays are overwhelmingly self-inflicted or self-curable. Before filing: reconcile AIS/TIS/26AS, confirm the bank account is pre-validated and the PAN is operative, and pick the correct ITR form. At filing: e-verify the same day — do not spend the 30-day window. After filing: keep the registered email and mobile current, check the portal periodically, and treat every intimation as having a clock attached, because it does.

Disclaimer: This article is for general informational purposes only and does not constitute professional advice. Provisions cited are as applicable to AY 2026-27 under the Income-tax Act, 1961, read with the Finance Act, 2026, as on the date of writing. Readers should consult their tax advisor before acting on any matter discussed herein.