ITR Filing 2025
As the new assessment year 2025–26 begins, many taxpayers are preparing to file their Income Tax Returns (ITRs) in anticipation of receiving refunds. However, a crucial update from the Income Tax Department may delay this process for a significant number of taxpayers. This year, income tax refunds may not be issued immediately if there are pending assessments or outstanding tax demands from previous years.
This change has caught the attention of salaried individuals and other taxpayers who usually expect a refund soon after filing their returns. The Income Tax Department is taking a stricter stance under Section 245(2) of the Income Tax Act, 1961, by adjusting refunds against past dues and withholdings until pending matters are resolved.
Why Refunds May Be Delayed in AY 2025–26
Before the tax refund for the current assessment year is processed, the department is checking whether the taxpayer has any unresolved assessments, reassessments, or outstanding tax dues from earlier years. If such issues exist, the taxpayer’s current refund will be blocked or adjusted accordingly.
The department has begun sending system-generated emails to affected taxpayers, notifying them of such pending assessments and the possibility of refund adjustment. Taxpayers are advised to check their income tax portal regularly for any notifications or notices related to Section 245(2).
What Is Section 245(2) of the Income Tax Act?
Section 245(2) empowers the tax department to adjust any refund due to a taxpayer against outstanding tax liabilities from earlier years. However, before such an adjustment is made, taxpayers are given an opportunity to respond and raise objections, if any.
Key Highlights of Section 245(2):
- The department can withhold or adjust refunds if there are pending tax dues.
- The Jurisdictional Assessing Officer (JAO) must review the case and approve any refund release.
- Taxpayers will receive an intimation notice and must respond within the prescribed time (usually 21 days).
Purpose Behind This Action
According to tax experts, the primary aim of enforcing this mechanism is to:
- Recover pending tax dues before releasing new refunds.
- Avoid revenue leakage and ensure compliance.
- Streamline taxpayer accounts by reconciling past and current filings.
This step is part of a broader initiative to enhance tax administration and accountability while minimizing delays caused by unresolved tax matters.
What Taxpayers Should Do Now
If you are planning to file your ITR for FY 2024–25 and are expecting a refund, take the following actions to avoid surprises:
✅ 1. Check Outstanding Tax Demands
- Log in to the Income Tax e-Filing Portal.
- Go to “Pending Actions” → “Response to Outstanding Demand”.
- Review the details of any outstanding tax demand.
✅ 2. Respond to Notices Under Section 245(2)
If you’ve received a notice or email, respond within the prescribed timeline. Delayed or no response may lead to automatic adjustment of your refund against the mentioned demand.
✅ 3. Dispute Incorrect Demands
If the tax demand:
- Has already been paid,
- Is under appeal,
- Is based on incorrect calculations,
Then, you should:
- Submit an online response with detailed justification.
- Upload supporting documents (e.g., challan receipts, appeal orders, rectification acknowledgments).
✅ 4. File a Rectification Request If Required
If online resolution doesn’t work:
- File a rectification request under Section 154, or
- Contact your Jurisdictional Assessing Officer (JAO) with a formal written representation.
Common Reasons for Receiving Refund Adjustment Notices
Tax experts say that several common triggers may prompt the issuance of refund adjustment notices, including:
- Discrepancies between reported income and actual income.
- Mismatch in TDS claims.
- Errors in previously filed returns.
- Returns selected for assessment or reassessment.
- Unpaid or incorrectly updated tax liabilities from past years.
In some cases, notices may also be issued under Section 133(6) of the Income Tax Act, which allows the department to request information or documentation from the taxpayer or any related party during ongoing proceedings.
Important Tips to Avoid Refund Delays
Here are some proactive steps every taxpayer should take this year:
- ✅ File your ITR early, especially if you’re expecting a refund.
- ✅ Regularly monitor your income tax account for updates or notices.
- ✅ Keep records of all past filings, payments, and appeals.
- ✅ Respond promptly to any communication from the department.
- ✅ Use a tax professional or CA for assistance in complex matters or dispute resolution.
Conclusion
For AY 2025–26, the Income Tax Department has adopted a more stringent approach toward refund issuance. If your previous returns have unresolved issues or you owe past dues, your refund may be withheld or adjusted under Section 245(2).
The best way to ensure timely processing of your refund is to stay compliant, verify your pending actions, and respond to any notices without delay. As experts suggest, routine notices should not be ignored, even if they seem minor. Proactive action now can prevent refund delays and complications later.
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