Are you among the taxpayers who received a lower income tax refund this year? You're not alone—and there's no need to panic. According to the Income Tax Department, the reduced refund amount is due to an ongoing adjustment process involving previous outstanding tax dues.
Many taxpayers have reported receiving notices from the Income Tax Department along with reduced refund amounts. This isn’t an error—it’s a part of a systematic adjustment procedure. The department is actively utilizing its authority under Section 245 of the Income Tax Act, 1961, to offset pending tax dues against the current year’s refunds.
This means if you had any previous outstanding tax liability, it could be automatically deducted from your current refund. In many cases, the department is issuing emails and notices to inform taxpayers about pending assessments or reassessments.
As per a recent report by Economic Times, emails were sent out by the Income Tax Deputy Director on March 11, 2025. These emails highlight that refunds will either be released or withheld based on decisions taken by the Jurisdictional Assessing Officer (JAO), as per Section 245(2) of the Act.
The email clearly states that an assessment or reassessment for the concerned financial year is pending. Therefore, the refund will only be processed after a detailed analysis is completed.
To understand these notices, you need to grasp the ITR (Income Tax Return) filing and processing flow.
Once an ITR is submitted through the official portal or third-party utility, it undergoes initial scrutiny by the Centralized Processing Centre (CPC).
If CPC suspects a tax demand might arise post-processing, the return is flagged and sent to the Assessing Officer (AO) for further examination.
This review might lead to reassessment if discrepancies are found, thereby delaying or adjusting the refund.
After the CPC flags a case:
The Faceless Assessing Officer (FAO) must inform the JAO within 20 days about any expected demand.
The JAO then has to analyze the taxpayer’s financial background, previous dues, and any pending appeals before taking a final decision.
Approval to hold a refund must be obtained from the Jurisdictional Principal Commissioner.
Finally, the JAO is allotted 30 days to make a decision on whether to release or hold the refund, bringing the total processing time to 50 days from the date CPC raises the alert.
If your refund this year is less than expected, don’t worry—it might simply be a lawful adjustment of past dues. The Income Tax Department is operating within its legal framework to settle pending liabilities. Watch for official emails and notices, and consult your tax advisor if you need clarification.
