For lakhs of salaried professionals and small business owners throughout India, waiting for an income tax refund has become substantially more stressful this tax season. What used to take three to four weeks is now taking well over a month on average, and for a large number of taxpayers, the wait has beyond the three-month mark with no end in sight.
In its 30th Report on Demands for Grants (2026-27), which was presented to Parliament, the Standing Committee on Finance defined a situation that many had been facing but the government had not fully disclosed. In FY 2025–2026, nearly 27 lakh refund cases were handled only after the customary 90-day processing window had passed. The average turnaround time for refunds increased to 35 days, the slowest processing time in at least three years, from 24 to 25 days in prior years.
The committee’s findings sparked fresh conversation online among taxpayers who had been waiting for months:
taxwatchindia (via X) “27 lakh refund cases delayed beyond 90 days in FY26. That’s not a glitch, that’s a systemic failure. Taxpayers deserve better from CBDT.”
The ‘Biryani Case’ And The Fraud Crackdown That Changed Everything:
To understand why refunds slowed down so dramatically, one needs to go back to July 2025. That month, the Central Board of Direct Taxes launched an intensive round of verifications triggered by evidence of widespread fraudulent deduction claims across the country. The CBDT Chairman, while addressing the parliamentary committee, specifically referenced what has since been dubbed the “Biryani case”, a high-profile fraud investigation that exposed the scale of bogus deductions being claimed under Section 80G, which covers donations to approved charitable institutions.
Put simply, a large number of filers had been claiming donation deductions they never actually made. When the tax department drilled into the data, the scale of the problem made it impossible to process returns at the usual pace. Officials had to slow down the entire pipeline to separate genuine claims from fabricated ones.
As a result, over 8.80 crore returns filed for Assessment Year 2025-26 came under a more rigorous cross-checking process matched against TDS records, Form 26AS entries, bank statements, mutual fund data, and other third-party financial disclosures. Even minor inconsistencies between what a taxpayer declared and what the department’s data showed were enough to put a return on hold.
Adv_TaxTalk (via X) “The Biryani case fallout is real. Entire refund queues held up because a fraction of filers gamed the 80G system. Genuine taxpayers are paying the price.”
NUDGE Campaign, Revised Returns, And ₹2,000 Crore Clawed Back:
Along with the fraud-related scrutiny, the CBDT initiated the NUDGE campaign (Non-Intrusive Usage of Data to Guide and Enable), which began in December 2025. Returns flagged for potential over-claiming or under-reporting were held up by this automated system, and taxpayers were notified via SMS or email to review and correct their filings before any refund could be given.
The campaign’s influence was measurable. During the year, more than 50 lakh revised or updated income tax returns were filed by taxpayers in response to notices. The voluntary corrective effort resulted in a reduction of approximately ₹2,000 crore in refund claims, which the government classified as incorrectly claimed or fraudulent. Officials referred to this as a “non-litigation approach” – the department favored urging taxpayers to correct their own mistakes rather than dragging them into lengthy fights.
Despite the rationale, the parliamentary committee was not entirely satisfied. Members acknowledged the reasoning behind tighter checks but pointed out that genuine taxpayers were bearing the cost of a problem largely created by a smaller group of fraudulent filers.
CAKaranBhatia (via X) “CBDT’s NUDGE approach has merit but why should a salaried employee with a clean return wait 90+ days? The system should have two tracks – fast lane for clean returns, deep check for flagged ones.”
Outstanding Tax Arrears And The Push For AI-Driven Solutions:
The committee’s report did not stop with refund delays. The report highlighted a significant structural issue in India’s direct tax system, with outstanding tax arrears of ₹47.42 lakh crore as of January 31, 2026. The tax agency recognized in its comments that an important portion of this amount is likely unrecoverable, due to circumstances in which companies have closed, assets do not exist, or legal actions have dragged on for years.
The committee criticised the existing approach of writing off only small individual demands in isolated instances, calling it insufficient. It recommended forming an inter-departmental task force to review the full backlog and build a structured plan for handling demands that realistically cannot be collected rather than letting them pile up as phantom figures on the government’s books.
On the refund side, the panel also urged the Income Tax Department to seriously explore deploying artificial intelligence tools to separate legitimate refund applications from suspicious ones at speed. The idea is that properly trained AI models could flag high-risk cases for human review while pushing clearly genuine claims through the process much faster reducing the collateral damage that broad manual verification exercises have caused this year.
The CBDT, for its part, has maintained that the delays are technically within legal limits. Under existing law, the department has up to nine months from the end of the relevant financial year to complete processing which means returns for AY 2025-26 can legally be handled all the way through December 2026. For millions of ordinary taxpayers refreshing the income tax portal every few days, however, that legal window offers little comfort.
@MoneycontrolNews (via X) “Parliamentary panel flags IT refund delays – 27 lakh cases crossed 90 days, average now 35 days vs 24-25 days earlier. CBDT cites fraud crackdown. Panel wants AI to fix it.”
