Missed the ITR deadline? I T dept eases processing rules for delayed returns filed in select cases; check details

In a major relief to taxpayers who missed the ITR filing deadline due to genuine hardships, the Income Tax Department has extended the time limit for processing belated returns filed under condonation of delay, ensuring that eligible individuals can now receive refunds previously held up due to procedural lapses.

According to CBDT Circular No. 07/2025, valid income tax returns filed electronically on or before March 31, 2024, under Section 119(2)(b)—where delays were condoned due to illness, technical glitches, or court orders—shall now be processed even if the timeline for issuing intimation under Section 143(1) has lapsed. The Board has directed that such intimations must be sent to concerned taxpayers by March 31, 2026.

However, this relaxation will not apply to cases where assessment, reassessment, recomputation, or revision proceedings for the relevant year have already been completed. Moreover, PAN-Aadhaar linkage is mandatory for refunds to be issued.

The Income Tax Act’s Section 119(2)(b) empowers the Central Board of Direct Taxes (CBDT) to allow exemptions, deductions, or refunds even after statutory deadlines, provided the taxpayer’s delay was beyond their control. Typical accepted reasons include serious illness, legal disputes, or system failures.

“Several genuine taxpayers were denied refunds or carry forward of losses simply because their ITRs, though condoned, were not processed within statutory timelines,” said Deepesh Chheda, Partner at Dhruva Advisors. “The latest CBDT circular rightly acknowledges these procedural delays and offers a much-needed corrective step.”

The issue stemmed from a large number of condoned returns filed post-deadline that went unprocessed due to technical limitations or administrative delays. These valid returns, though accepted under condonation provisions, were left hanging without intimation notices—a mandatory step before refunds could be disbursed.

The extension applies to returns filed electronically on or before March 31, 2024, under the condonation of delay as per section 119(2)(b) of the Income Tax Act. The directive states: “The Board has now relaxed the time limit for processing of valid returns and directed that such returns where the time limit for issuing intimation has expired, shall now be processed.” The intimation will be sent to affected taxpayers by the new deadline, ensuring they receive their due refunds.

However, this relaxation does not apply to cases where assessment, reassessment, or recomputation processes have been completed for the relevant assessment year. Moreover, refunds will not be processed if there is an issue with PAN-Aadhaar linkage. This ensures that only genuine claims are processed and prevents misuse of the extended deadlines.

The Director General of Income-tax (Systems) in Bengaluru is responsible for specifying procedures to ensure compliance with the new timeline. This procedural oversight aims to streamline the processing of such ITRs under section 119(2)(b) of the Act. Additionally, the department has emphasized the importance of maintaining accurate records and ensuring that all necessary documentation is submitted to avoid further delays.

Chheda explained, “The Income Tax Act, 1961 provides that a taxpayer can claim a refund or claim losses carry forward by filing a return of income as per the applicable provisions.” 

It’s important to note that no interest will be payable on belated refunds, and refunds must arise from excess tax deduction at source (TDS), excess advance tax, or self-assessment tax payments. Also, the assessee’s income must not be clubbed with another person’s income to qualify for this relief.

In October last year, CBDT had clarified that condonation applications for refund/loss claims would not be accepted beyond five years from the end of the assessment year concerned. For applications filed on or after October 1, 2024, this five-year time limit will strictly apply.

Furthermore, the competent authority must aim to dispose of condonation requests within six months from the date of receipt. If approved, no interest or penalty will apply to the taxpayer.

This circular is a welcome move that bridges procedural delays with taxpayer fairness, offering long-overdue resolution for genuine refund claims.