Tax Department Denies Withholding Refunds; 17% Drop Recorded in FY26

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Tax Dept: No Refund Withholding, Decline Due to Systemic Changes

More than 95 percent of refund cases have already been processed in FY26

M

Moneycontrol•11-02-2026, 14:48

Tax Dept: No Refund Withholding, Decline Due to Systemic Changes

•Income-tax refunds declined 17% to Rs 3.11 lakh crore in FY26 as of January 11, compared to Rs 3.75 lakh crore last year.
•Tax department denies withholding refunds, attributing the decline to rationalized TDS, new tax regime adoption, and analytics-driven verification.
•Automated data checks flagged inconsistencies, leading to closer scrutiny of claims and reduced incorrect refund payouts.
•Taxpayer compliance nudges resulted in Rs 9,640 crore additional tax implications, with Rs 1,750 crore from reduced refund claims.
•Shift to the new tax regime (88% adoption among ITR-1 to ITR-4 filers) and a high base effect from FY25 also contributed to lower refunds.

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