Why is Income Tax Dept On ITR Processing Slow This Year?

Why is Income Tax Dept On ITR Processing Slow This Year?

• Overall 25% Less ITRs have been processed so far.
• ITR 2 Processing Growth: -59%
• ITR 3 Processing Growth: -37%

Delay in ITR Processing: 

Lot of factors collectively explain the slowdown in Income Tax Return processing this year, with an overall 25% decrease in processed returns, a 59% decrease in ITR 2 processing growth, and a 37% decrease in ITR 3 processing growth. These factors collectively explain why the Income Tax Return processing is slower this year, particularly for ITR 2 and ITR 3, which have seen a significant decrease in processing growth.  The delay in Income Tax Return processing this year can be attributed to several factors:

1. Detailed Scrutiny: The CPC now has access to more data for reconciling Income Tax Return, leading to a thorough examination of each return, which slows down the processing time.
2. Defective ITRs: A stricter process flow implemented by Centralized Processing Center ensures accuracy and compliance. Many returns have been flagged as defective due to discrepancies, missing information, or errors, resulting in slower processing.
3. Complexity of ITR 2 & 3: ITR 2 and ITR 3 are more detailed and involve multiple income sources, investments, and deductions. Their complexity naturally leads to longer processing times, especially under enhanced scrutiny.
4. System Updates and Overhauls: Recent updates to the tax processing systems might also contribute to delays as they adjust to handle new data reconciliation and processing methods.
5. Increased Filings: With more taxpayers filing returns than ever, the increased volume itself might be a factor contributing to slower processing times.
6. ITR Form Used: Simpler forms like ITR-1, used by individuals with straightforward income sources, are processed more quickly than more complex forms like ITR-2 and ITR-3, which involve multiple income sources, investments, and deductions.
7. Complexity of the ITR: More complex returns take longer to process, especially if they include numerous claims for deductions and exemptions.
8. Accuracy and Completeness: Returns that are accurate, complete, and well-documented are processed faster than those with discrepancies or missing information.
9. System Updates: Recent system updates and overhauls can temporarily slow down processing as systems adjust to new methods.

Total ITRs Filed Status for AY 2024-25

The Income Tax Department has acknowledged the efforts of taxpayers and tax professionals for timely compliance, which led to a record surge in Income Tax Return filings. Here are the key highlights:

• Total Income Tax Return’s Filed: Over 7.28 crore ITRs for AY 2024-25 were filed by July 31, 2024, marking a 7.5% increase from the 6.77 crore Income Tax Return filed for AY 2023-24 during the same period the previous year. The Income Tax Department reported a record-breaking number of Income Tax Returns (ITRs) filed for Assessment Year (AY) 2024-25, totaling over 7.28 crore by the July 31 deadline. This figure represents a 7.5% increase compared to the 6.77 crore ITRs filed by the same date for AY 2023-24.
• New Tax Regime: 72% of taxpayers opted for the New Tax Regime, with 5.27 crore Income Tax Returns filed under it, compared to 2.01 crore under the Old Tax Regime. Out of these 7.28 crore ITRs, 5.27 crore were filed under the new tax regime, while 2.01 crore were filed under the old tax regime. This indicates that approximately 72% of taxpayers opted for the new tax regime, with the remaining 28% continuing to use the old tax regime.
• Peak Filing Day: On July 31, 2024, over 69.92 lakh Income Tax Return were filed, with the highest hourly rate of 5.07 lakh filings between 7:00 pm and 8:00 pm.
• Portal Usage: There were over 3.2 crore successful logins on July 31, 2024.
• First-Time Income Tax Return Filers: About 58.57 lakh Income Tax Returns were from first-time filers, indicating a broader tax base.
• Availability of Forms: ITR-1, ITR-2, ITR-4, and ITR-6 were available from April 1, 2024, with ITR-3 and ITR-5 released earlier than in previous years.
• Helpdesk Support: The Income Tax Return e-filing Helpdesk team handled about 10.64 lakh queries.
• Issue Resolution: Through ORM on X (Twitter), 1.07 lakh e-mails were handled between April 1 and July 31, 2024, resolving 99.97% of the issues raised.

ITR Defect FAQ issued by income tax India