With December 31, 2025, fast approaching, countless taxpayers across India are keenly watching the status of their Income Tax Returns (ITRs) for the ongoing assessment year. While a significant number of returns have already been processed, a considerable backlog persists, raising concerns over delayed refunds, missed opportunities for corrections, and potential future tax demands.
### Current Status of Income Tax Returns
As of December 28, approximately 8.5 crore ITRs have been filed and verified for the Assessment Year (AY) 2025-26. Out of these, around 7.8 crore returns have been processed by the Centralised Processing Centre (CPC). Yet, more than 70 lakh returns remain unprocessed. This situation has left many taxpayers anxious about the status of their filings, particularly with the deadline looming on the horizon.
### What Changes After December 31?
December 31 does not alter the speed at which the Income Tax Department processes returns; rather, it signifies the final statutory deadline for taxpayers to voluntarily revise or file belated returns for the assessment year. Once this date passes, taxpayers lose their right to make revisions to their ITRs voluntarily, even if their returns are still pending processing by the CPC.
Many misunderstand this critical distinction, believing they have unlimited time for corrections as long as their ITR is unprocessed. In reality, the right to revise a return ends at the deadline, not when processing is completed. Post-December 31 corrections become procedural, typically triggered only by a notice from the tax department.
### Why Do So Many Returns Remain Unprocessed?
The backlog of unprocessed returns is largely attributed to refund-related issues stemming from data mismatches. Common discrepancies include inconsistencies between Form 16 and the submitted ITR, incorrect reporting of deductions, or discrepancies regarding claims related to political donations and exemptions that don’t match departmental records. In this assessment year alone, over 21 lakh revised returns have been filed, a majority of which were prompted by system-generated alerts from the tax department.
### Consequences of Not Revising In Time
If an ITR is processed post-December 31 and the CPC makes adjustments—like disallowing a deduction—the taxpayer’s options become considerably limited. Tax professionals highlight that while taxpayers can file an updated return (ITR-U) under Section 139(8A) for up to four years from the end of the assessment year, this comes with additional tax liabilities. Depending on the delay, taxpayers may face extra tax rates from 25% to 70%, along with accrued interest.
It’s essential to note that an updated return is only for disclosing additional income or rectifying under-reporting; it cannot be used to reduce tax liability or enhance a potential refund.
### Unprocessed Returns and Refunds: What You Need to Know
An unprocessed return does not imply that your refund will be forfeited. The law grants the Income Tax Department sufficient time to process returns, and refunds owed after processing must be paid. Delays not attributable to the taxpayer may also lead to interest accrual, as outlined by statutory provisions.
However, refunds related to unresolved mismatches may remain stalled pending resolution of these discrepancies, which can only occur through limited mechanisms available after the deadline. If a mismatch is confirmed and the taxpayer fails to revise their return in time, the CPC may issue a tax demand notice under Section 143(1), possibly raising the prospect of penalties for misreporting income.
### Processing Timelines: How Long Can the Tax Department Take?
Current regulations state that the CPC has nine months from the end of the financial year in which a return is filed to process an ITR. For instance, a return submitted by July 31 or December 31, 2025, can legally be processed any time until December 31, 2026. Should the CPC fail to process the return within this timeframe—provided the case isn’t selected for assessment or reassessment—the taxpayer is entitled to their refund plus any applicable interest under Section 244A.
Once processed, refunds are generally credited within about a week, although actual timelines may differ based on the specific circumstances.
### Interest on Delayed Refunds
In cases where a refund is due, the government is obligated to pay simple interest at a rate of 0.5% per month—equating to 6% annually—calculated based on the period of delay.
### The Importance of the December 31 Deadline
The significance of December 31 extends beyond merely determining whether a refund arrives sooner or later; it pertains to who holds control over the correction process. Prior to this deadline, taxpayers can rectify mistakes without facing penalties. However, afterward, the system takes charge, typically at a much higher financial cost.
Tax advisers emphasize the need for taxpayers who receive mismatch alerts to act swiftly and review their filings rather than assuming that pending processing will resolve the issue. As the deadline approaches, even minor oversights could incur substantial costs to correct.
### The Takeaway for Taxpayers
For those still awaiting the processing of their returns, remember: the true clock ticking is not that of the CPC’s but your own. Taking proactive measures now can be crucial in navigating the complexities of tax compliance and avoiding possible pitfalls down the line.
