Taxpayers can anticipate quicker tax refunds this year, thanks to the reduced processing time for Income Tax Returns (ITR). Finance Minister Nirmala Sitharaman recently announced in Parliament that the average time to process ITRs has decreased significantly from 93 days in FY 2013-14 to just 10 days in FY 2023-24. While this marks a substantial improvement, it's important to note that not all ITRs will be processed within this 10-day timeframe. The complexity of the ITR form impacts the processing time; for instance, ITR-3 takes longer to process than ITR-2, and ITR-2 takes longer than ITR-1.

Regarding tax refunds for FY 2023-24 (AY 2024-25), filers of simpler ITR forms like ITR-1 are likely to receive their refunds faster. Former Chief Commissioner of Income Tax Ramakrishnan Srinivasan explained that refunds for ITR-1, if filed without any defects or adjustments, are often processed within a few days of filing. In contrast, refunds for ITR-2 and ITR-3 may take a couple of months, especially if returns are filed close to the deadline.

Historically, tax refunds have become progressively quicker. Srinivasan noted that in 2007-08, taxpayers typically waited 12 months for refunds after filing. The situation improved with the establishment of the Centralised Processing Centre (CPC), reducing processing times to 4 to 6 months in the early 2010s. Now, some taxpayers receive refunds just days after filing their returns.

Several factors have contributed to this acceleration in ITR processing. CA Amit Bansal from Singhania & Co highlighted that the shift from manual to digital processing since 2013 has significantly reduced processing times. S. R. Patnaik, Head of Taxation at Cyril Amarchand Mangaldas, pointed out that the tax department has made substantial backend improvements over the past decade, especially during the COVID-19 pandemic, which necessitated a major upgrade in digital infrastructure. The current technology is advanced, with automated tax computations minimizing errors and reducing processing time.

Bansal also noted that in 2013, ITR processing was slower due to the need to send a physical copy of the ITR-V acknowledgment to the CPC in Bangalore, which added to the mailing and manual processing time. Since then, the introduction of Aadhaar-based e-verification, a new tax filing portal launched in 2021, and increased automation have streamlined the process. These changes have contributed to the significantly faster processing of ITRs and refunds.