The Role of CPC in Tax Refunds: Causes of Delays and Solutions

An income tax refund is the money you get back on paying more tax than what you had to. Sometimes, the refund can get delayed, and there are many reasons for it, all of which we will explore later in the article

The role of CPC in income tax processing is significant. CPC centralises the entire process of ITR verification and refund processing, by eliminating manual interventions. It ensures accuracy and transparency in tax administration. Thanks to CPC, you also get timely updates about your tax filings. CPC processes ITRs, checks tax computation, and issues refunds or demand notices. It also provides e-verification and Grievance Redressal services. Thereby, making the entire process of tax refunds more streamlined and effective.

The following are the areas where CPC in Income Tax plays significant role:

• Uploading TDS and tax payments from the Online Tax Accounting System
• Checking for errors in ITR and tallying the claim amount with TDS details in Form 26A/CPC-TDS
• Notifying taxpayer about the issue found in the form of demand notice, as provisioned u/s 143(1) of IT Act, 1961
• Calculating interest for late ITR filing or late payment of taxes as provisioned u/s 234(A)
• If refund amount is found to be successfully verified, posting the same in Financial Accounting System (FAS)

An income tax refund delay is something nobody likes, but it can happen to anyone.. The following are the most common cases for delays in income tax refund by CPC:

• Errors in ITR Filing: One of the most common causes is errors or discrepancies in your tax return. It could be miscalculations, incomplete documentation, concealing income sources, and falsifying records to minimise tax liability etc. Again, if you have filled in incorrect or incomplete information, such as a wrong address, incorrect PAN, or wrong bank account details, it can further delay your income tax refund.
• Incorrect Bank Details: Avoid adding incorrect bank details, PAN numbers, or addresses. Make sure you add proper documents, too. The Centralised Processing Centre or CPC plays a key role in income tax refund by being extra careful in verifying the records. They also offer remedies to correct such issues before processing the refund.

Pending verification on the ITR portal: After filing the taxes, you’re required to verify the return either electronically or physically by sending a signed copy of the ITR-V to the CPC. If this is not done, the return will remain unprocessed, causing a delay.

• Mismatched Claim Amount in Form 26A and ITR: A major cause of tax refund is mismatch in the claim amount mentioned in Form 26A and ITR. To verify the TDS, Form 26A is of utmost importance. If, at the time of verification, CPC finds discrepancies in both forms, the refund is held back until the issue is addressed.
• Adjusting previous tax liabilities: If there is any tax liability pending from the previous year, the department will sort it out in the current year against the refund.
• Filing for ineligible exemptions: In case you file for an exemption or deduction you were not eligible for, it can increase the chances of an audit of your claims, causing a major hold-up in your refund.

You can check your income tax refund status, raise a complaint, or contact the tax authorities if unexplained delay is observed. However, to avoid any tax refund delays in the first place, ensure correct filing, timely verification, and resolving any outstanding tax dues.

There are two ways in which you can check the status of your income tax refund. These are:

To resolve the issue firsthand, check if the bank information you added was correct or not. It could be an account number, IFSC Code, Branch name, or anything else. If everything is correct on your end, you need to connect to the Income Tax Department and reissue your refund. You can do this via telephone, email, or e-filing portal. Just make sure to provide your PAN number, the assessment year, and the exact amount to be refunded.

Notably, if your refund is delayed because of the department, you are eligible for interest on your money, as per Section 244A of the Income Tax Act.

The interest rate is 0.5% p.a. from 1st April until the refund is credited, provided your returns are filed before the deadline. However, you’re not eligible for the interest if the tax paid is less than 10% of your income.

You can request a tax refund re-issue through the e-filing portal by following these steps:

• 1. Visit the Income Tax e-filing portal and log in to your account. Then, open the "Services" section.
• 2. There, choose "Refund Re-issue" and then click on "Create Refund Reissue Request."
• 3. Select the Assessment Year to proceed.
• 4. Check and Validate the bank details.
• 5. Proceed with the e-verification process and submit the refund re-issue request.

The different types of income tax refund statuses hold different meanings. The following table reflects on that:

The Centralised Processing Centre (CPC) is a crucial wing of the Indian Taxation system. To avoid any unnecessary income tax refund delays, it is important you understand the functioning of this body. With apt knowledge of CPC’s role, you can make better financial decisions.