With only one day remaining until December 31, a large pile of income tax returns (ITRs) for the current assessment year still remains unprocessed. While some involve refund claims, others are stuck after system alerts flagged mismatches in Form 16 and ITR due to deductions or disclosures such as political donations. There are a few cases where the tax department has not yet issued a final computation.
What changes on December 31 is not how fast the tax department works, but how much room taxpayers have left to respond.
The silent shift after December 31
Once the calendar moves past December 31, taxpayers lose the option to voluntarily revise their return for the year, even if the return has not yet been processed.
This distinction has caused confusion. Many taxpayers assume that as long as their return is still pending, they can revise it later if needed. That is not how the system works. The right to revise ends with the deadline, not with processing. After that point, any correction becomes procedural rather than voluntary.
How many returns are still stuck
As of December 28, around 8.5 crore income tax returns have been filed and verified for AY 2025–26. Of these, around 7.8 crore returns have already been processed. This leaves over 70 lakh returns still awaiting processing at the Centralised Processing Centre.
More than 21 lakh revised returns have been filed this year, largely after mismatch alerts and compliance nudges from the department.
Tax experts say a significant portion of the unprocessed cases involve refund claims, which are automatically put on hold when discrepancies are detected.
What happens if you don’t revise in time
If a return is eventually processed after December 31 and the tax department makes an adjustment, the options narrow sharply.
“If taxpayer chooses not to revise their return, then still taxpayer can file updated return u/s 139(8A) upto 4 years from the end of AY and taxpayer can revise their claim of deductions/exemptions. However, tax and interest to be paid shall be higher which shall be as per the provisions of section 139(8A),” said CA Viraj Mehta, Chairman Direct Taxes Committee at Chamber of Tax Consultants.
The additional tax payable on updated returns is 25 percent, 50 percent, 60 percent, and 70 percent applicable in the first, second, third, and fourth year, respectively. ITR-U once filed must be verified as well.
Does a pending return mean your refund is lost?
No. A refund does not vanish simply because a return remains unprocessed after December 31.
The law gives the tax department time to complete processing, and refunds that arise after processing remain payable. Where delays are not attributable to the taxpayer, interest is also built into the framework.
However, refunds linked to unresolved discrepancies can remain frozen until the matter is settled through the limited channels still open after the deadline.
“If a taxpayer received a notice to file a revised return but does not file a Revised ITR by December 31, 2025, then the original ITR becomes final from assessee’s side. The assessee loses the “no-penalty” window to voluntarily correct mistakes,” said Rohit Jain, Managing Partner, Singhania & Co.
If the Income Tax Department (CPC) processes the return thereafter and confirms the mismatch (e.g., rejects the political donation claim), the assessee may face the following situation:
The assessee cannot file a Revised ITR to correct the error because the statutory deadline (Dec 31, 2025) has passed.
The CPC will send an intimation under Section 143(1) raising a tax demand for the disallowed amount, plus interest.
Since the mismatch was flagged and the assessee chose not to revise, the Department may view this as “misreporting of income,” which may attract penalties ranging from 50 percent to 200 percent of the tax evaded under Section 270A.
How long does government have to process returns
CPC cannot process the ITR after the expiry of 9 months from the end of the financial year in which the return is furnished by the taxpayer. “For example, if the ITR is filed on July 31, 2025, or say December 31, 2025, CPC can process the return anytime on or before December 31, 2026, and not beyond that. Where CPC fails to process an ITR within the prescribed time limit and such return is not taken for assessment or reassessment, the taxpayer becomes entitled to tax refund which he claimed in the ITR along-with applicable interest under section 244A which will be computed up to the date of grant of such return,” said Gopal Bohra, Partner -Tax, N.A. Shah Associates.
“Though, time limit for processing has been statutorily defined, however, time limit for issuance of refund is not defined which generally coincides with the processing of Income Tax return and refund can be expected within 1 week from processing of ITR,” said Rohit Ahuja, Partner, Ved Jain and Associates.
How much interest government pays when I-T refunds are delayed?
The law clearly states that when a refund becomes due, the taxpayer is entitled to simple interest at 0.5 percent per month or part of a month. This works out to an annual interest rate of 6 percent, calculated monthly on the refund amount.
Why the deadline still matters
December 31 is not about refunds arriving late or early. It is about leverage. Before that date, taxpayers control the correction. After it, the system does.
Advisors say taxpayers who have received mismatch alerts should review them carefully rather than assume processing delays will resolve the issue. Once the revision window closes, even a small oversight can become expensive to undo.
For those still waiting on processing, the message is simple: the clock that matters is not the CPC’s. It is yours.