Taxpayers are experiencing longer wait times for income tax refunds amid increased scrutiny and system bottlenecks. The Finance Ministry aims to address these delays through the launch of Project Insight 2.0, leveraging artificial intelligence to streamline processing times.
Income tax refunds are taking longer to reach taxpayers, with the Finance Ministry saying the average wait has risen to 35 days, up from 24 days in financial year 2024, according to InformalNewz. The delay has left many filers waiting for more than three months in some cases, adding to frustration during a year when refund processing has become a sharper focus for the tax authorities.
Officials say the main bottlenecks include incorrect bank details, unlinked PAN and Aadhaar numbers, and cases that are pulled aside for extra checks because of possible fraud. LiveMint has reported that refund problems are often linked to incomplete processing, mismatches in return data and other compliance issues, while ET Now said minor taxpayer errors and high-value claims can also trigger closer review.
To speed things up, the ministry is preparing to launch Project Insight 2.0 on January 27, 2028, with artificial intelligence at the centre of the system. According to the report, the platform will analyse historical data and risk signals to separate genuine claims from suspicious ones more quickly, with the aim of cutting back on unnecessary scrutiny and shortening the time taxpayers have to wait.
The wider backdrop is a tougher tax environment. The Economic Times said refund payments have fallen by nearly 19% in financial year 2025-26, partly because of the NUDGE data-analytics campaign and wider scrutiny of discrepancies in filings. Business Standard reported that nearly 27 lakh refund cases were processed beyond the 90-day standard in the same period, while the Standing Committee on Finance has pointed to fraudulent claims, including bogus donations under section 80G, as one reason officials are keeping a closer watch. Financial Express quoted the CBDT chairman as saying low-value refunds are moving through, but flagged claims are taking longer and may be cleared later in the year.
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