A Complete Guide to Income Tax Refunds in 2025

Income Tax Refunds in 2025:

Understanding about Income Tax Refunds

An income tax refund arises when the tax amount paid against the reported income is greater than the actual payable amount of tax. For ex., if a taxpayer has paid Rs. 1,00,000 in taxes for the AY 2025-26, yet their true tax liability is only Rs. 80,000, they are eligible for a refund of Rs. 20,000 from the Income Tax Department. Once the income tax return has been verified, the income tax department initiates the tax return process. After the tax return is processed, it will take some time may vary from case to case. But we can say that refund can be issued in around 2-45 days and the same can be credited to the bank account of the taxpayer.

Eligibility of Income Tax Refunds in 2025

To be eligible for an income tax refund, a taxpayer must file an income tax return. Here are the instances in which a taxpayer becomes eligible to claim a tax refund:

• Advance Tax Payment: If the advance tax paid on estimated income exceeds the actual tax liability of a taxpayer, they are entitled to claim a refund for the excess amount paid.
• Tax Deducted at Source (TDS): If the tax deducted at source (TDS) from sources such as salary, interest, professional fees, or other incomes is higher than the tax payable on regular assessment, the taxpayer can claim a refund for the excess TDS amount.
• Excess Self-Assessment Tax: If the self-assessment tax paid by the taxpayer is more than the actual tax liability determined through regular assessment, the taxpayer can claim a refund for the surplus amount paid.
• Tax Paid in Both India and a Foreign Country: If an individual is taxed on their income in both India and a foreign country with whom India has a double taxation avoidance agreement, they may be eligible to claim a refund for the excess tax paid on the income, subject to the terms of the agreement.

By filing an income tax return and meeting any of these conditions, taxpayers can ensure they receive any refunds owed to them by the tax authorities.

Step to check the status of your Income Tax refund

You can check your IT refund in following 2 scenarios:

1. If your refund issued after 1^st April 2023, you can proceed with these steps:
2. Login at Income Tax portal.
3. Under Services tab, Select “Know Your Refund Status”
4. Enter the relevant assessment year
5. You can find the box about your status of the IT refund

• If your refund issued before 31^st March 2023, you can proceed with these steps:
• Visit at NSDL website
• Enter your PAN number
• Select the assessment year
• Enter the requisite security text
• You can find status about your IT refund.

What are the possible reasons for the Income Tax Refund delay?

There could be several reasons. Here are some common ones:

• Errors on Your Tax Return: If your tax return contains errors or discrepancies, your refund processing may be delayed. To avoid this, review your return carefully and ensure all details, such as your Social Security number, income figures, and deductions, are accurate.
• Processing Time: Tax refunds may take time to process, especially during peak filing periods. If you’ve recently submitted your return, you might just need to wait for the tax authorities to review and issue your refund.
• Taxes or Debt Owed: If you have outstanding taxes or other government debts, your refund may be reduced or withheld to cover those amounts. The Income Tax Department can retain all or part of your refund to settle any unpaid dues.
• Mismatch in Form 26AS: A discrepancy between the TDS details in your income tax return and the information in Form 26AS could cause delays in processing your refund. Form 26AS serves as a record of all tax payments linked to your PAN.
• Return under Scrutiny: To ensure accuracy, the Income Tax Department may select certain returns for scrutiny. While this may cause a slight delay in your refund, it will only be temporary, pending the completion of their additional assessment.
• E-verification of ITR: E-verification of your income tax return is mandatory. Without verification, your return will not be processed. Make sure to complete the verification process within 30 days of filing your ITR.
• Bank Account Verification: To receive your ITR refund, make sure your bank account is pre-validated. The name on your bank account must match the details on your PAN card. The refund will be credited to the bank account you mentioned in your ITR. Providing incorrect account details may result in not receiving the refund.

What to do if Income Tax refund is pending?

If your refund hasn’t been credited to you due to a mismatch in account numbers, follow these steps:

• Confirm Account Information: Ensure your bank account number and IFSC code are accurate as per your tax return.
• Match Bank Records: Cross-check the details with your bank account to avoid discrepancies.
• Account Validation: Make sure your bank account is validated in the IT portal and nominated for refunds.
• Check Account Status: Contact your bank to confirm that your account is active and free from any restrictions.
• Pre-Validation: Ensure your bank account is pre-validated in your Income Tax portal.
• Refund failed: Request for refund re-issue through login at your IT portal.

Frequently Asked Questions (Income Tax Refunds in 2025)

Q. Why my ITR status is still showing that return under processing?

This means you have completed the tax return filing process. Now, you must wait for the Central Processing Centre (CPC) to review it. Once the review is complete, the status will update to “ITR Processed,” indicating that the Income Tax Department has approved your return for the assessment year.

Q- Who can claim a TDS refund?

• Individuals & Salaried Employees: If excess TDS has been deducted from salary, interest income, or other earnings beyond the actual tax liability.
• Self-Employed & Business Owners: If TDS deducted on payments received exceeds the total tax payable.
• Senior Citizens: If TDS is deducted on interest income despite their income being below the taxable limit.
• NRIs (Non-Resident Indians): If higher TDS is deducted on payments like rent, property sales, or NRO account interest, but actual tax liability is lower.
• Companies & Firms: If TDS deducted on business payments is more than the actual tax payable after deductions and exemptions.

A TDS refund is claimed by filing an Income Tax Return (ITR) for the relevant financial year. If the tax payable is lower than the TDS deducted, the excess amount is refunded by the Income Tax Department.

Q- When is TDS not refundable?

TDS (Tax Deducted at Source) is not refundable in the following situations:

• Total Tax Liability is Equal to or More Than TDS Deducted: If the total tax payable as per your income tax calculation is equal to or exceeds the TDS already deducted, no refund is due.
• Non-Filing of Income Tax Return (ITR): If you do not file your ITR within the due date, you cannot claim a TDS refund, even if excess tax has been deducted.
• TDS Deducted Correctly as Per Tax Liability: If the deducted TDS matches your actual tax liability, there is no excess to refund.
• Unclaimed Deductions or Exemptions: If you fail to claim eligible deductions (like under Section 80C, 80D, etc.) while filing your return, the excess tax deducted might not be refunded.
• TDS Deducted on Income above Taxable Limit: If the income on which TDS was deducted is genuinely taxable and falls above the exemption limit, the deducted TDS will be adjusted against the tax due, not refunded.

Income Tax Refunds in 2025

To ensure you receive a refund if eligible, always file your ITR correctly and on time while claiming all applicable deductions. You can also reach out us to assist you in your ITR filing.

The information provided in above blog is for general informational only and should not be considered as legal or tax advice. Request you to please follow latest updated in reference to above details. We advise to consult with a qualified tax professional such as “Taxunplug” for all your income tax needs.