Festive Season

As the festive season begins, many small businesses and individual taxpayers are facing an unexpected financial crunch. Data from industry trackers and tax professionals indicate that income tax refunds this year have fallen by nearly 50% compared to the same period last year. An estimated ₹60,000 crore in refunds is reportedly yet to be disbursed by the Income Tax Department. For small businesses, this delay comes at a critical time. The Diwali season traditionally marks a peak in demand, requiring additional working capital for inventory, salaries, and operations. For individuals, delayed refunds have disrupted personal and festive spending plans, dampening consumer sentiment. Refunds Stuck in Verification, Scrutiny Tax experts attribute the slowdown to multiple factors, including enhanced scrutiny under faceless assessments, automated mismatch alerts, and the new AI-based risk flagging system introduced this year. “We’ve seen several cases where refunds are withheld pending verification, even after successful processing of returns. The new automated checks seem to have slowed disbursement,” said a Mumbai-based chartered accountant advising mid-sized firms. Sources within the department suggest that refunds linked to large deductions or business losses are being reviewed more closely this year, part of an effort to plug revenue leakages and improve compliance accuracy. Impact on MSMEs and Consumption The delay is being felt most sharply by micro, small, and medium enterprises (MSMEs) that rely on timely refunds as a source of liquidity. “Refunds are not a subsidy—they are taxpayers’ own money. Holding them back during the festive season affects cash flow, credit cycles, and consumption,” said an industry association representative. Retailers and consumer goods companies have also noted slower sales momentum this October compared to last year, citing both reduced refunds and rising borrowing costs. Taxpayers have taken to social media, tagging @IncomeTaxIndia and seeking clarity on the refund delay. Many are urging the department to disclose refund processing statistics and provide a timeline for pending disbursements, especially for those already verified under the faceless system. https://twitter.com/CAChirag/status/1977902218398560768 While the Income Tax Department has not issued an official statement yet, experts expect refund clearances to pick up post-Diwali, once ongoing assessments are finalized. Read More: Know Changes In Table 6 of GSTR-9 for FY 2024–25

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