Tax Refund Mistakes: Impact & Solutions

Tax refunds in India are delayed or denied for predictable reasons - unverified or wrong bank account, PAN-Aadhaar not linked, ITR not e-verified within 30 days, mismatch between AIS / TIS / 26AS and ITR, deductions claimed without proof, or old outstanding demands adjusted under Section 245. To fix, pre-validate your bank on incometax.gov.in, link PAN with Aadhaar, reconcile AIS before filing, e-verify immediately, respond to every Section 143(1) and Section 245 notice within 30 days, and use Refund Reissue or e-Nivaran where the refund has been returned or delayed.

Priyanka Wadhera

Published: 20 Aug 2023

Updated: 16 May 2026

4 min read

A tax refund should be a routine credit to your bank account, not a saga of follow-ups, rectifications and grievances. Yet every filing season, lakhs of Indian taxpayers see refunds delayed, adjusted against old demands, or returned to the department because of avoidable errors. In 2026, with the CPC at Bengaluru running tightly automated workflows, the path to a fast refund is largely about getting the inputs right - and knowing exactly where to fix things when they go wrong.

Common Refund Mistakes

The bulk of refund problems trace back to a handful of recurring errors:

Wrong or unverified bank account - refunds bounce back to the department
PAN-Aadhaar not linked - PAN inoperative and refund withheld
Mismatch between TDS in 26AS, AIS / TIS and the ITR
Income from AIS not reported - return processed with addition under Section 143(1)
Capital gains computed without indexation or with wrong cost
Deductions claimed without proof or in excess of statutory limits
ITR not e-verified within 30 days - return treated as invalid
Outstanding demands of earlier years adjusted under Section 245 without response

Impact of Refund Errors

The cost is more than just delayed cash:

Loss of interest under Section 244A where refund is delayed due to taxpayer's fault
Adjustment under Section 245 against demands you may not have known existed
Section 143(1) intimation creating demand instead of refund
Selection for scrutiny under Section 143(2) when AIS mismatch is significant
Penalty under Section 270A for under-reporting of income
Loss of refund altogether where ITR becomes invalid for non-verification

Step-by-Step Solutions

Fix refund issues in this order:

Check refund status on incometax.gov.in under 'View Returns / Forms' or via TIN-NSDL refund tracker
Verify the bank account is pre-validated and EVC-enabled - update if not
Compare ITR with AIS, TIS and 26AS - file revised return under Section 139(5) if material errors
Respond to Section 143(1) intimation within 30 days - file rectification under Section 154 if mismatch is clerical
Respond to Section 245 adjustment notice within 30 days, contesting incorrect old demands
Use 'Refund Reissue' on the portal where refund was returned due to bank issues
Raise a grievance under e-Nivaran for delays beyond statutory timelines

Section 244A Interest on Delayed Refunds

Where the refund is delayed beyond the time limit, the department pays interest at 0.5% per month or part thereof under Section 244A, computed from 1 April of the AY (where return is filed on time) to the date the refund is granted. Interest is denied for periods of delay attributable to the assessee - non-verification, late filing, or non-response to notices. Track the interest claim in your records; the department does not always compute it correctly.

Preventive Habits for FY 2026-27

Adopt these habits to make refunds boring:

File ITR well before 31 July to maximise processing window
Pre-validate and EVC-enable a primary bank account on the portal
Link PAN with Aadhaar immediately
Download AIS and TIS before filing; reconcile every line
E-verify within 30 days, preferably immediately after filing
Maintain documentary proof of every deduction and exemption claimed
Respond to every intimation, notice or SMS from CPC promptly

Tracking Refund Status: The Two Channels

Track refund status through two complementary channels. On incometax.gov.in, log in and navigate to 'View Returns / Forms' to see the processing status of each ITR. Statuses progress through 'Submitted', 'Verified', 'Processed' (with refund determined or demand raised), and 'Refund Issued'. The portal also shows the bank account and IFSC where the refund was credited or returned. On tin.tin.nsdl.com or the State Bank of India refund tracker, enter PAN and AY to see the latest status pushed by NSDL on behalf of the CPC.

Where the refund is shown as 'Refund Returned by Bank', the most common reasons are invalid IFSC, closed bank account, name mismatch, or unverified bank account. Use the 'Refund Reissue' service on the e-filing portal: select the relevant year, choose a fresh pre-validated bank account, and submit. Reissue typically reaches the new account within 2 to 4 weeks. For delayed Section 244A interest payments or unaddressed grievances, escalate through e-Nivaran, the centralised grievance portal of the Income Tax Department.

Conclusion

Tax refunds in 2026 reward preparation and punctuality. Validate your bank, link Aadhaar, reconcile AIS, file early, e-verify immediately, and respond to every CPC communication on time. The refund machinery is fast and automated when your inputs are clean - and frustratingly slow when they are not. Treat refund management as an active discipline, not a passive wait.

Frequently Asked Questions

Why is my income tax refund delayed?

Most refund delays are caused by an unverified or invalid bank account on the portal, ITR not e-verified within 30 days, mismatch between AIS / 26AS and reported income, outstanding demand adjustment under Section 245, or PAN-Aadhaar not linked. Track status on the e-filing portal, address the specific reason cited, and use Refund Reissue or e-Nivaran for follow-up where appropriate.

How long does refund processing take?

Once ITR is e-verified, the CPC typically processes simple refund claims within 2 to 8 weeks. Returns flagged for scrutiny, AIS mismatch, or pending demand adjustment under Section 245 can take longer. Complex claims involving capital gains, foreign assets or rectification of intimation can extend to several months. Section 244A interest at 0.5% per month compensates for excess delay.

What is Section 245 adjustment?

Section 245 allows the income tax department to adjust the current year's refund against any outstanding tax demand of earlier years before issuing the balance. The taxpayer receives an intimation and 30 days to respond. If the old demand is disputed or paid, respond on the portal with evidence; failing to respond, the adjustment goes through and only the net balance is refunded.

Can I claim interest on delayed refund?

Yes. Section 244A entitles you to simple interest at 0.5% per month or part thereof on the refund amount, computed from 1 April of the relevant Assessment Year (where ITR is filed on time) to the date the refund is granted. Interest is not payable for periods of delay attributable to the assessee, such as late e-verification or non-response to notices.