Filed your I-T returns early but still waiting? Processing isn’t first-come, first-served
From automated risk filters to complex income sources, here is why a friend who filed weeks after you might get their tax refund first
Anand is a well-informed person, and he is meticulous about filing his Income-Tax Return (ITR) on time. This year, he filed it on June 16. However, his friend filed his ITR in the first week of July and received a refund for excess tax paid within two days. Anand is surprised that even though he filed his return almost three weeks before his friend did, his return is yet to be processed.
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Anand always follows proper procedures. He is aware that employers have until May 31 to file TDS (Tax Deducted at Source) returns for the tax deducted during the fourth quarter (January-March). He also knows that it takes the income-tax department roughly a week or two to process these massive loads of Q4 TDS returns and reflect them accurately across the portal.
Therefore, in all probability, it is safe to assume that by June 15, Form 26AS, the Annual Information Statement (AIS), and the Taxpayer Information Summary (TIS) get fully synchronised. This is why he filed his return on June 16—to ensure that all data would be properly available with the I-T department to process his return.
What is Form 26AS?
Form 26AS is an annual consolidated tax statement issued by the I-T department. Linked to your Permanent Account Number (PAN), it contains details of all tax deducted (TDS) and collected (TCS) at source, advance/self-assessment taxes paid, and income tax refunds processed during a financial year.
Now the question arises: Is there a specific order in which individual ITRs are cleared? How could the return filed later by Anand’s friend be processed earlier than Anand's?
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We must understand that ITRs are not necessarily processed on a strict first-in, first-out (FIFO) basis. It is quite common for a return filed later to be processed before one that was filed earlier.
There are certain reasons for this, such as:
Risk-based processing: The I-T department uses automated systems to categorise returns based on risk. Straightforward returns with little or no mismatch may be processed very quickly, while others may undergo additional validation.
Type of return: Salaried taxpayers with only Form 16 income and matching information in Form 26AS/AIS/TIS are often processed faster than returns involving capital gains, business income, foreign assets, or multiple deductions.
Data matching: If there are discrepancies between the return and the information reported by employers, banks, mutual funds, stock exchanges, or other reporting entities, processing may be delayed.
Refund cases: Refunds are generally processed after return processing. Some refunds may undergo additional verification, especially if they are large or involve unusual claims.
Key takeaway
Filing early and accurately is always the best practice, but processing times vary based on the complexity of your specific financial profile. Just because a peer received their refund faster does not necessarily mean there is an issue with your tax return.
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Automated tax systems prioritise simpler, straightforward returns (like those with standard salaried income) and will take more time to cross-verify data for returns involving investments, business income, or large refund claims.
As long as your filed data correctly matches your Form 26AS, AIS, and TIS, your return will be successfully processed in due time.
