Refunds account for 17.6% of India's gross tax collections in FY25

The time taken by the income-tax department to process refunds has dropped sharply

India's net direct tax collection, with refunds adjusted, grew 22.5 per cent to Rs 6.93 trillion between April 1 and August 11 of FY25. — The introduction of pre-filled returns, automation in refund processing, real-time TDS adjustments, and online grievance redress mechanisms have led to reduced delays and improved taxpayer experience | Illustration: Ajay Mohanty

2 min read Last Updated : Jul 13 2025 | 10:54 PM IST

Refunds accounted for 17.6 per cent of India’s gross direct tax collections in FY24-25, rising from 11.5 per cent in FY13-14, according to finance ministry sources.

Meanwhile, the time taken by the income-tax department to process refunds has dropped sharply. On average, taxpayers received refunds in 17 days in 2024, compared to 93 days in 2013, marking an 81.7 per cent decline in processing time.

Data from the Principal Chief Controller of Accounts (PrCCA) and the Central Board of Direct Taxes (CBDT) show that refunds issued rose from ₹83,008 crore in FY13-14 to ₹4.76 trillion in FY24-25, registering a 474 per cent increase. In the same period, gross direct tax collections grew from ₹7.21 trillion to ₹27.02 trillion, rising 274 per cent increase.

"This increase in tax refunds and decrease in number of days in issuing refunds is due to improvements in tax administration, especially with the adoption of digital infrastructure including end-to-end online filing and faceless assessment that enables faster and more accurate processing of returns," sources said.

ALSO READ: CCI revises probe order against Asian Paints, removes previous findings

The introduction of pre-filled returns, automation in refund processing, real-time TDS adjustments and online grievance redress mechanisms has led to reduced delays, and improved taxpayer experience, according to sources.

The number of income-tax returns filed has also risen. From 38 million returns in 2013, filings increased to 88.9 million in 2024, marking a 133 per cent increase. However, unique PAN-wise returns filed during FY24-25, including updated returns, reached 91.9 million, reflecting a 141 per cent growth, the sources added.

According to sources, the growth in refunds as a share of gross tax collections reflects increased formalisation and voluntary tax participation. As the taxpayer base grows and advance tax and TDS deepen, excess payments are more common. Rising refunds signal systemic maturity and show India’s tax system is aligned with efficiency, transparency, and taxpayer facilitation.