New Delhi — The Central Board of Direct Taxes (CBDT) has pushed back against the perception that the Income Tax Department held up refunds during the current financial year. In an interview published by The Indian Express on 10 February, CBDT Chairman Ravi Agrawal stated that 95 per cent of refunds have already been disbursed and the remainder should be processed within February.
His remarks came as official data showed tax refunds issued between April and January fell roughly 17 per cent year-on-year to ₹3.12 lakh crore. Agrawal attributed the drop not to any deliberate delay but to structural changes in the tax system that have reduced the volume of refund claims.
Key Highlights
- 95% of FY26 refunds cleared; remaining cases expected to be processed in February 2026.
- Refund outflows dropped 17% to ₹3.12 lakh crore (April–January), driven by lower refund claims—not deliberate withholding.
- Net direct tax collections stood at ₹19.43 lakh crore as of 10 February, up 9.4% year-on-year.
Why refund payouts fell 17% in FY26
Agrawal identified two primary reasons behind the decline:
- TDS Rationalisation: Tax Deducted at Source (TDS) rates have been rationalised in recent years, meaning less excess tax is deducted at source. Consequently, fewer taxpayers need to file for refunds.
- Shift to New Regime: The accelerating migration to the new tax regime—88 per cent of individual filers chose it in Assessment Year 2025-26, up from 76 per cent a year earlier—has lowered the quantum of deduction-based refund claims that were more common under the old regime.
He addressed the concern directly, noting that taxpayers observing a drop in refund outflows may assume the department is sitting on their money. That inference, he maintained, does not hold because the underlying number of eligible refund claims has itself declined.
NUDGE campaign flagged ₹1,750 crore in wrong claims
The CBDT ran its NUDGE (Non-intrusive, Uniform, Digital, Goal-oriented and Efficient) campaign in November and December of both 2024 and 2025 to identify erroneous refund and deduction claims.
According to Agrawal, the exercise prompted 1.11 crore taxpayers to file revised or updated returns, yielding ₹8,800 crore in additional tax over two years. Refund claims worth ₹1,750 crore were withdrawn voluntarily by filers after they received NUDGE alerts.
About 60 per cent of the respondents were non-filers who subsequently entered the tax net, a figure Agrawal cited as evidence that the campaign widened the tax base rather than harassed genuine claimants.
Net direct tax collections climb 9.4% to ₹19.43 lakh crore
Separately, the Income Tax Department released fresh collection data on 11 February.
- Net Direct Tax Receipts (April 1 – February 10): ₹19.43 lakh crore (+9.4% YoY).
- Gross Collections: ₹22.8 lakh crore (+4.1% YoY).
- Total Refunds Issued (April 1 – February 10): ₹3.34 lakh crore.
The government has set a full-year direct tax collection target of ₹25.20 lakh crore for FY26, requiring a significant acceleration in the remaining weeks of the fiscal year.
No sunset date for old tax regime
Agrawal also confirmed that the government has no plan to phase out the old tax regime. While the new system has drawn an overwhelming majority, taxpayers retaining the old structure do so for specific deduction benefits. The choice, he said, remains entirely with the taxpayer.
Frequently Asked Questions
Refund claims have decreased because TDS rates were rationalised and 88 per cent of individual filers moved to the new tax regime, which involves fewer deduction-linked refund claims than the old system.
CBDT Chairman Ravi Agrawal has denied any intent to hold back refunds. He stated that 95 per cent of refunds for the current financial year have been disbursed, with the rest expected in February 2026.
The NUDGE campaign was a CBDT-run exercise in late 2024 and 2025 that identified erroneous refund and deduction claims through data analytics. It resulted in 1.11 crore revised or updated returns and ₹8,800 crore in additional tax revenue.
CBDT Chairman Agrawal has confirmed there is no sunset date for the old tax regime. Taxpayers who find the old system’s deductions more beneficial can continue to use it.
Disclaimer: This article is for informational purposes only and does not constitute financial or tax advice. Readers are advised to consult a qualified tax professional for guidance specific to their circumstances.
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