Improved tax administration has resulted in a five-fold increase in income tax refunds, while direct tax collections have increased threefold over the last decade. The time required has also decreased from 93 days to 17.

The massive increase in tax refunds and decrease in the number of days to issue refunds is due to improvements in tax administration, particularly the adoption of digital infrastructure, such as end-to-end online filing and faceless assessment, which allows for faster and more accurate processing of income tax returns.

Key Highlights

• Income tax refunds surged 474%—from ₹83,008 cr in FY 2013–14 to ₹4.77 lakh cr in FY 2024–25.
• Refund processing time dropped from 93 to 17 days, reflecting digital reforms and streamlined assessments.

The implementation of pre-filled returns, refund processing automation, real-time TDS adjustments, and online grievance redress mechanisms has resulted in fewer delays and a better taxpayer experience, according to a source.

Refunds as a percentage of gross tax collections were estimated at 17.6% in the previous fiscal year, compared to 11.5% in 2013-2014.It reflects increased formalisation and voluntary participation in the tax system.

As the taxpayer base grows and advance tax payments and TDS mechanisms improve, excess remittances become more common. The increasing volume and share of refunds are thus more than just a statistical trend, but a meaningful indicator of systemic maturity.

"It demonstrates that India's tax ecosystem is now firmly aligned with the principles of efficiency, transparency, and taxpayer facilitation," a source claimed.

Despite muted growth in gross collections, refunds have not slowed so far this fiscal year. Direct tax collections were 3.2% higher in the fiscal year ending July 10, but refunds were 38% higher, resulting in a decrease in net collections.

Also Read: FM Sitharaman Advocates for Prompt Tax Refunds and Enhanced Services 

In the past, the government would often delay refunds to ensure that net collections were not impacted. However, the Modi government has continued to issue refunds, acknowledging that stopping them impedes cash flow for businesses, affecting overall economic activity.