Over the past few days, thousands of taxpayers across India have received an unexpected message from the Income Tax Department. The SMS or email said their refund claim had been “identified under the risk management process” and that processing had been put on hold.

For many salaried taxpayers who were expecting routine refunds, the message was unsettling. It did not say what was wrong. It did not say what action was mandatory. And it did not say how long the refund might remain stuck. In the absence of clarity, confusion quickly spread.

Screenshots of the message began circulating on social media and taxpayer forums.

People asked whether this meant scrutiny, penalties, or a formal notice. For a tax system that has spent years trying to project simplicity and trust, the reaction revealed a deeper unease.

As 2025 draws to a close, most income taxpayers are likely to have bittersweet memories of the year. It started with a bang as Finance Minister Nirmala Sitharaman hiked the rebate limit under section 87A from Rs.7 lakh to Rs.12 lakh, basic exemption limit from Rs.3 lakh to Rs.4 lakh and rejigged tax slabs under the new tax regime. With these changes, the new regime will be beneficial for most taxpayers across income levels. Those with higher deductions, for instance, taxpayers with incomes of over Rs.24 lakh and total annual deductions of over Rs.8 lakh (this breakeven threshold will be lower for lower income groups) stand to save more under the old regime. The relevant sections include Section 10(13A) for house rent allowance, Section 80C for tax-saving deductions, Section 80D for health insurance premiums, and Section 24(b) for home loan interest, among others. Cut to the end of the year, however, and the cheer has lost its spark to an extent. This is thanks to the flurry of emails that the income tax department sent to taxpayers, flagging discrepancies' in their 1-T returns for the assessment year 2025-26. Here's what shaped your income tax landscape in 2025:

Budget 2025 bonanza
The Union Budget 2025 hiked the income tax rebate and the basic exemption limits under the new tax regime. Tax slabs were liberalised under the new tax regime. Salaried employees with incomes of up to Rs.12.75 lakh have to pay no tax, after factoring in the standard deduction of Rs.75,000. "This has increased their disposable income. Secondly, higher thresholds for tax deducted at source (TDS) have eased compliance; most notably, TDS on rent now applies only if the monthly rent exceeds Rs.50,000," says Sumeet Hemkar, Partner, Deloitte India. Moreover, the budget also effected rationalisation of Tax Collected at Source (TCS) on goods and foreign remittances under the liberalised remittance scheme (LRS).

The Income Tax Department has launched a new feature that allows taxpayers to file rectification applications for specific income tax orders directly online with relevant authority. This change eliminates the previous lengthy process where taxpayer had to manually submit rectification requests or route them through the Assessing Officer (AO).

The Income Tax Department said: "Applications for rectification against TP/DRP/Revision Orders can now be filed directly before the Respective Authority through the e-filing portal under the Services Tab-> Rectification->Request to AO seeking rectification."
What does this mean?
Chartered Accountant (Dr.) Suresh Surana explains that this update in the e-filing income tax return (ITR) portal means that taxpayers can now electronically file rectification applications directly with the appropriate tax authority through the income-tax e-filing portal. This is a shift from the old offline or manual methods, especially in cases where there is a clear mistake in certain assessment-related orders.

For millions of taxpayers, the wait for income tax refunds has stretched longer than usual this year. With just six days left before December 31, the deadline to file revised and belated ITRs for AY 2025-26, anxiety is clearly building among those who are yet to hear from the tax department.

The numbers explain the concern
As of December 25, 2025, around 8.53 crore income tax returns (ITRs) have been filed for the current assessment year. Out of these, 8.41 crore returns have been verified and only about 7.80 crore have been processed so far.

This leaves around 73 lakh taxpayers waiting for their returns to be processed and refunds, if any, to be issued.

Indian residents can invest in outbound US dollar denominated mutual funds in GIFT City to diversify their portfolios, especially since many domestic overseas mutual fund schemes have either paused fresh investments or curtailed it. This situation has arisen from RBI's restrictions on overseas investments by domestic mutual funds. GIFT stands for Gujarat International Finance Tec-City and it is in Gandinagar, Gujarat. It is also India's first international financial services centre (IFSC).

Indian residents can invest in outbound US dollar denominated mutual funds in GIFT City to diversify their portfolios, especially since many domestic overseas mutual fund schemes have either paused fresh Investments or curtailed it. This situation has arisen from RBI's restrictions on overseas investments by domestic mutual funds. GIFT stands for Gujarat International Finance Tec-City and it is in Gandinagar, Gujarat. It is also India's first international financial services centre (IFSC).

Income tax refund status: The Income Tax Department
has stepped up scrutiny for income tax returns and
several taxpayers have not received their income tax
refunds this year. The delay in tax refunds is a result of
greater vigilance on tax deductions and exemptions
that have been claimed by taxpayers in their tax filing.
Ahead of the December 31, 2025 deadline for filing an updated or belated return, the Income Tax Department has also launched a NUDGE (Non-intrusive Usage of Data to Guide and Enable) campaign, urging taxpayers to file updated tax returns since their exemptions, deduction and refund claims have been found to be ineligible.

ITR December 31, 2025 Deadline Important For Tax Refunds
According to an ET report, the income tax refunds for those taxpayers may face a delay if they fail to file revised Income Tax Return by the December 31, 2025 deadline for Assessment Year 2025-26, particularl cases where errors or missing information have resulted in incorrect refund claims or data mismatches.

The Central Board of Direct Taxes Tuesday said more than 1.5 million taxpayers have revised their income tax returns (ITRs) for the current assessment year (2025-26) as part of a voluntary compliance initiative.

It said over 2.1 million taxpayers updated ITRs for AYs 2021-22 to 2024-25, resulting in additional tax collections exceeding Rs 2,500 crore during the current fiscal year.

The revisions were the result of the 'non-intrusive usage of data to guide and enable (Nudge) campaign' launched by the income tax department after advanced data analytics flagged ineligible claims for deductions or exemptions.

Amid surging complaints by taxpayers over stuck income tax refunds for the ongoing assessment year 2025-26, the Income Tax Department on Tuesday said certain taxpayers have “claimed ineligible refunds by availing deductions or exemptions to which they are not entitled, resulting in understatement of income”. The Department said it has contacted such taxpayers through SMS and email under the NUDGE campaign to correct such errors for which the revised returns need to be filed by December 31.

Sources said the Income Tax Department had been scrutinising high-value deductions and refunds above the threshold of Rs 50,000 but it has now started to issue refunds which is likely to reflect in the next 10 days.

A new message from the Income Tax Department has triggered confusion and concern among taxpayers this week. Many people have reported receiving an SMS saying their ITR refund claim has been “identified under risk management process” and that processing has been kept on hold due to “certain discrepancies.”

Several users on Twitter and LinkedIn have flagged the same experience, calling the communication unclear and anxiety-inducing.

The alert mentions that the return has been flagged for review and advises taxpayers to file a revised return before December 31. It also claims that an email with details has already been sent, although many recipients say no such email has arrived.

The Press Information Bureau (PIB) has released a detailed fact-check report after a social media post claimed that the Income Tax department would be able to access social media accounts, emails and other digital platform details of users from April 1, 2026. PIB flagged the post as misleading, adding that under the provisions of the Income Tax Act 2025, such measures will be limited to 'Search and Survey' operations, meaning the honest taxpayers will remain unaffected.

"Unless a taxpayer is undergoing a formal search operation due to evidence of significant tax evasion, the department has no power to access their private digital spaces," PIB stated, highlighting that an X handle @IndianTechGuide shared the misleading post, claiming mass digital surveillance by tax authorities.

According to PIB, the Income Tax Department cannot access private digital platforms for routine assessments, data processing, or scrutiny cases. Law-abiding taxpayers are not affected by these provisions.

PAN-Aadhaar linking deadline: The final date to complete your PAN-Aadhaar card linkage is December 31, 2025. Beginning January 1, 2026, the Income Tax Department will declare all PANs that remain unlinked as inoperative.
As per Notification No. 26/2025, issued on April 3, 2025, individuals who were allotted a PAN using an Aadhaar Enrolment ID before October 1, 2024 are required to complete the linkage using their permanent Aadhaar card number by the end of 2025. PAN cards that are not linked by the deadline will be marked inactive or inoperative and cannot be used for tax related or major financial transactions, according to an ET
report

The Central Board of Direct Taxes has cautioned that non-compliance will have financial consequences, including suspension of income tax refunds and the application of higher tax deduction at source rates from January 1, 2026.

In FY2024-25, two co-founders sold their stakes in a start-up to a large corporation. One co-founder received Rs 75 lakh in total, while the other got Rs. 45 lakh. Both filed their income tax returns (ITRs) on time in ITR-2 and declared the capital gains.

When December began, the first co-founder received an automated message from CPC about a significant mismatch in his tax return. To his surprise, the other co-founder got no such communication, and his ITR was processed smoothly. Automated Tax Matching Systems used by the CPC are the main reason for this difference in how the same transaction is treated.

The Automated Tax Matching Systems use machine-learning-based algorithms to reconcile the income and tax details reported by a taxpayer in their Income Tax Return (ITR) with a vast array of financial data and the AIS. In case of any mismatch, an automated notice is sent to the taxpayers. The mismatch could be due to many reasons, such as non-reporting of income or improper disclosure.

When Mr. Rao surrendered his three unit-linked insurance policies (ULIP's), which he had bought from Bajaj Allianz Life Insurance 14 years ago for Rs 75 lakh, he ended up with net long term capital gains of Rs 3.22 crore. However, Rao made a mistake in his income tax return (ITR). He incorrectly categorized this Rs 3.22 crore LTCG from ULIP surrender under as capital gains income instead of income from other sources.

As a result, the tax department issued him a notice, and eventually, the tax officer slapped a penalty of Rs 2.48 crore on him.
Rao decided to contest this, first in CIT (A) and later in the Income Tax Appellate tribunal (ITAT) Hyderabad. On November 19, 2025, he won the case in ITAT Hyderabad. Advocate H Srinivasulu represented him.

Waiting for an income tax refund can test anyone’s patience. For many taxpayers, the delay feels even more frustrating when they expect interest on the amount due. While the Income Tax Act does allow interest on delayed refunds, the benefit does not apply in every case.

Interest on delayed refunds is paid at 6% per annum under Section 244A of the Income Tax Act. It is calculated from April 1 of the assessment year until the day the refund is credited. However, there are clear situations where taxpayers may not receive this interest, even if the refund is delayed.
WHY REFUNDS ARE FACING DELAYS
Refund processing has slowed down due to a mix of compliance checks and data issues. Common problems include incorrect bank details, Aadhaar–PAN linking errors and wrong claims made in returns.

The Income Tax Department has clarified that the emails recently sent to taxpayers over mismatches between income tax return (ITR) disclosures and financial transactions are only “advisory” in nature and not for penalty or scrutiny.

The clarification comes after many taxpayers reported receiving emails and SMS alerts flagging high-value transactions linked to their PAN that were either not reported in their ITRs or appeared disproportionate to their declared income.

In an official statement, the department said, “Some references have come to the notice of the Income Tax Department regarding recent communication sent to taxpayers pertaining to transaction(s) made by them.”

India’s net direct tax collections rose 8% to Rs 17.05 lakh crore so far in the current financial year, helped by steady growth in corporate tax receipts and lower refunds, official data showed Friday.

Data released by the Income Tax department showed that net collections between April 1 and December 17, 2025, stood at Rs 17,04,725 crore, compared with Rs 15,78,433 crore in the same period last year. Gross direct tax collections grew 4.16% year-on-year to Rs 20,01,794 crore.

Corporate tax collections remained the biggest contributor, with net corporate tax rising to Rs 8,17,310 crore, up from Rs 7,39,353 crore a year ago. Net non-corporate tax collections, which include taxes paid by individuals and other entities, increased to Rs 8,46,905 crore from Rs 7,96,181 crore.

Taxpayers who donate to charitable organisations can claim tax deduction under Section 80G of the Income Tax Act, 1961in the old tax regime. To help taxpayers understand how Section 80G tax deduction works, the tax department released many Frequently Asked Questions (FAQ) on December 19,
ules/2025
2025.

S. Sriram, Executive Partner, Lakshmikumaran and Sridharan attorneys, said to ET Wealth Online: "The FAQs highlight the broad legal principles and procedural regulations relating to claiming donations to eligible institutions as deduction in income tax returns. But read with the "NUDGE" campaign and recent press release of the CBDT, the intended effect of the FAQ is much more than the clarifications given therein. The FAQ is a guidance note by the CBDT to tax payers to test their claim for deduction for donations, against the principles explained in the FAQ."
FAQS to Section 80G- Tax deduction for donation What is Section 80G of the Income Tax Act, 1961?
Section 80G provides for a deduction in computing the total income of an assessee in respect of donations to certain funds, charitable institutions, etc.

The December-quarter installment of advance taxes showed a marginal improvement over the previous two quarters, but lagged the year-ago growth by a wide margin. The overall direct tax receipts significantly lagged Budget projections, increasing the chances of significant shortfall in tax revenue collections in FY26, latest set of official data showed.

The Centre’s advance tax collections for the third quarter of 2025-26 (Q3) from companies, LLPs and individuals rose by 4.27% on year, compared with a 20.9% growth seen in the year-ago quarter, owing largely to the massive personal income tax relief announced in the Budget. In absolute terms, Q3 advance tax collections stood at Rs 7.88 lakh crore as on December 17, according to data released by the Central Board of Direct Taxes (CBDT).

Personal Income Tax Gap
While advance taxes paid by corporate assesses rose nearly 8% to Rs 6.07 lakh crore in Q3, collections from the non-corporate sector declined 6.5% to Rs 1.81 lakh crore. The non-corporate tax includes taxes paid by individuals, HUFs, firms, local authorities, artificial juridical persons etc.

The Income Tax Department has stepped up its efforts to bring more people into the tax net by closely tracking high-value financial transactions carried out by individuals and entities who do not file income tax returns, Parliament was informed recently.

As part of this effort, the Central Board of Direct Taxes (CBDT) has rolled out a Non-Filer Monitoring System (NMS). The system uses data analytics to identify people who have undertaken large financial transactions but have not filed their income tax returns, the Finance Ministry said in a response to a query in the Rajya Sabha.

According to the Finance Ministry, the NMS brings together information received from multiple third-party sources such as banks, financial institutions, registrars and other reporting entities. This includes data from Statement of Financial Transactions (SFT), Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) filings.

On December 18, 2025, at 5.58 PM, the
Income Tax Department announced that they have received some references regarding recent communications sent to taxpayers regarding their transaction(s).

The income tax department is referring to the automated intimations via email being sent to many taxpayers about AIS mismatch, property transaction, foreign income, foreign asset, car purchases, etc.

The Income Tax Department said: "Taxpayers may please note that such communication is to facilitate the taxpayers & make them aware of the information available with the ITD regarding the transactions reported by the Reporting Entities during the year."