In response, the Central Board of Direct Taxes (CBDT) stated that several returns reflected understatement of income due to deductions or exemptions that taxpayers were not legally entitled to claim. Such discrepancies have triggered enhanced verification before refunds are released.
High-Value Refunds Under Enhanced Scrutiny
According to official sources, the Department has been closely scrutinising returns involving high-value deductions and refund claims exceeding ₹50,000. While this additional verification has contributed to delays, officials indicated that the refund issuance process has now begun and is expected to reflect in taxpayers’ accounts over the next 10 days.
The Department emphasised that the scrutiny exercise aims to ensure accuracy and prevent revenue leakage, particularly in cases where deductions were claimed without proper eligibility or documentation.
NUDGE Campaign and Revised Return Advisory
As part of its Non-Intrusive Usage of Data to Guide and Enable (NUDGE) campaign, the Income Tax Department has contacted lakhs of taxpayers through SMS and email alerts, advising them to review their income tax returns and correct any discrepancies.
Taxpayers flagged under the campaign have been asked to file revised returns by December 31, 2025, failing which further enquiries or verification proceedings may follow.
Common Errors Identified by the Department
Officials noted that discrepancies largely relate to deductions claimed for donations to unrecognised political parties or charitable institutions, mismatches between Tax Deducted at Source (TDS) data and the Annual Information Statement (AIS), and non-disclosure of foreign income or assets.
In several instances, incorrect or invalid Permanent Account Numbers (PANs) of donees were quoted, while in others, the extent of deduction exceeded permissible limits under the Income-tax Act.
Refund Trends and Updated Return Statistics
Official data shows that refunds issued between April 1 and December 17 were 13.52 per cent lower compared to the same period last year. So far, over 15 lakh revised returns have been filed for AY 2025–26.
Separately, more than 21 lakh taxpayers have filed updated returns (ITR-U) for assessment years ranging from 2021–22 to 2024–25, resulting in additional tax payments exceeding ₹2,500 crore during the current financial year.
Understanding Revised and Updated Returns
A revised return can be filed up to three months before the end of the relevant assessment year, making December 31 the final deadline for AY 2025–26. An updated return, introduced to enhance voluntary compliance, can be filed within 48 months from the end of the assessment year.
However, filing an updated return attracts additional tax liability. If filed between 24–36 months, an extra 60 per cent tax on the additional income is payable, which rises to 70 per cent if filed between 36–48 months.
Calls for Deadline Extension
Since many NUDGE communications were issued only in December, taxpayer groups and professionals have urged the government to consider extending the revised return filing deadline by at least one month, up to January 31, 2026.
The Department, however, has not announced any extension so far and has reiterated that taxpayers with genuine and correctly claimed deductions need not take any further action.
