Income Tax Refund Tracking India FY 2026-27: TDS Refund Process, Delays, Section 154 Rectification

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In short: If your TDS deducted (by employer, bank, etc.) exceeds your actual tax liability, you can claim a refund by filing ITR. The refund process is automated – once you file and e-Verify, the IT Department processes the return at the Centralised Processing Center (CPC) in Bengaluru. Refunds typically arrive in 3-8 weeks. Refunds are credited only to a pre-validated bank account linked to your PAN. If delayed beyond 3 months, you are entitled to 0.5 percent monthly interest under Section 244A. Common causes of delay: PAN-Aadhaar mismatch, defective return notice, scrutiny selection, mismatched TDS records in Form 26AS. Use the e-Nivaran portal to escalate stuck refunds.

How TDS Refund Works

TDS (Tax Deducted at Source) is provisional – your employer, bank, mutual fund, etc. deduct tax at specified rates and deposit with IT Department under your PAN. When you file ITR, the IT Department computes your actual tax liability based on declared income and deductions. If the TDS exceeds your actual tax due, the difference is refunded.

Common refund scenarios:

Salaried earner whose employer over-deducted because investments declared via Form 12BB were lower than actual.

Senior citizen whose bank deducted 10 percent TDS on FD interest but total income is below taxable limit.

Freelancer/professional who paid advance tax based on estimated income, but actual income turned out lower.

Investor whose dividend TDS (10 percent) exceeded slab tax (5 percent or below 87A rebate).

Pre-Filing Checklist

Before filing ITR with refund claim:

1. Verify AIS and Form 26AS match your records of TDS deducted. See AIS reconciliation guide.

2. Pre-validate your bank account on incometax.gov.in (Profile section). The account must be in your name with PAN linked.

3. Check PAN-Aadhaar linking status. Inoperative PAN delays refund. PAN-Aadhaar linking guide.

4. Ensure all income is declared. If you skip income that appears in AIS, the return becomes “defective” and refund stalls.

Refund Timeline

End-to-end typical: 3-8 weeks. For straightforward returns filed in July-August, sometimes as fast as 7-15 days.

How to Check Refund Status

Three ways:

1. Income Tax Portal (incometax.gov.in): Login – My Account – View e-Filed Returns/Forms – Status. Shows: Return Filed, Return Verified, Processing, Refund Issued, Refund Received.

2. NSDL TIN Portal (tin.tin.nsdl.com): Enter PAN and AY. Shows refund status from RBI/SBI angle – “Refund processed but failed”, “Refund paid”, “Refund returned”.

3. SMS/Email alerts: The IT Department sends automatic alerts on refund issuance.

Common Refund Delays

Delay 1: Bank Account Not Pre-Validated

Refund cannot be credited. Go to incometax.gov.in – Profile – My Bank Account – Pre-Validate. Wait 7 days for SBI/NPCI verification.

Delay 2: PAN-Aadhaar Mismatch

Refund withheld until linked. Pay Rs 1,000 Section 234H fee, link, wait 7-30 days.

Delay 3: Defective Return (Notice u/s 139(9))

The IT Department finds an error in your return. You receive a defective notice. Correct within 15 days via “Respond to Defective Return” on portal. Re-process resumes.

Delay 4: TDS Mismatch with Form 26AS

You claimed Rs 50,000 TDS but Form 26AS shows only Rs 40,000. CPC processes the lower figure. You can file rectification under Section 154 with proof.

Delay 5: Refund Adjusted Against Existing Demand

Section 245 allows the IT Department to adjust your refund against any prior outstanding demand. You receive a Section 245 intimation – respond within 15 days agreeing/disagreeing.

Delay 6: Return Selected for Scrutiny

Rare for routine refund claims. If selected for limited or complete scrutiny, refund waits until assessment is completed.

Section 244A – Interest on Delayed Refund

If refund is delayed beyond 3 months from end of AY (e.g., 30 June for FY 2025-26), interest at 0.5 percent per month applies on the refund amount.

Example: Refund of Rs 50,000 delayed by 6 months (paid in February 2027 instead of August 2026). Interest: Rs 50,000 x 0.5 percent x 6 = Rs 1,500.

The interest is paid automatically along with the refund. No need to claim separately. The interest itself is taxable as Income from Other Sources in the year received.

Refund Rectification – Section 154

If you disagree with the refund amount (CPC computed lower than what you claimed), file a rectification request under Section 154 within 4 years from end of FY in which intimation was received:

1. Login to incometax.gov.in

2. e-File – Rectification – Income Tax Return

3. Select the relevant AY and intimation number

4. Specify the error (TDS mismatch, deduction not allowed, etc.)

5. Upload corrected XML if structural changes needed

Rectification typically processed in 30-60 days.

Escalation – e-Nivaran

If your refund is stuck beyond 60-90 days with no clarity:

1. File a grievance via incometax.gov.in – e-Nivaran

2. Select category “Refund related” – subcategory matching your issue

3. Provide PAN, AY, refund amount, contact details

Grievances are typically resolved in 15-30 days. If unresolved, you can escalate to the Ombudsman.

Bank Account Validation Failure

If your refund is “Refund returned” (sent but failed), it usually means the bank account changed/closed or was not validated. Update the new account on the portal and request reissue under “Reissue of Refund” section.

FAQs

How do I know my refund amount?

Computed in your ITR acknowledgement and the Section 143(1) intimation. Both downloadable from the portal.

Can I check refund status without login?

Yes – NSDL TIN portal allows PAN + AY-based public check.

What if my refund is much less than expected?

Check the Section 143(1) intimation for the line-by-line computation. Common deductions: arithmetic adjustments, TDS not matched in 26AS, deductions not allowed. File Section 154 rectification if you disagree.

Are refunds taxable?

The principal refund amount is not taxable (it is your own money). But the interest under Section 244A is taxable as Income from Other Sources.

What if my bank account is NRO?

NRIs can pre-validate NRO accounts on the portal. Refunds are credited normally.

Sources

• Income Tax Act, Section 244A – interest on refund
• Section 154 – rectification of mistake
• Section 245 – adjustment of refund against demand
• Section 143(1) – summary assessment
• incometax.gov.in – Refund/Demand Status portal
• NSDL TIN portal – public refund tracking