Tax Refund Delays to Ease as Project Insight 2.0 Set for 2028

The second set involves flags raised by the department’s existing systems. Large-scale claims of bogus deductions or exemptions triggered additional validations. “Many validations were carried out, and this has led to increase in the number of cases above 90 days as well as increase in the average no. of days in issuance of refunds,” the department said. Other flagged cases include High-Risk Returns, Prima Facie Adjustment cases, and variance analysis where the taxpayer’s reported output differs from expected. Each of these triggers a hold while officials manually review, the ministry said.

The Master Service Agreement for Project Insight 2.0, currently under development, aims to automate much of that review. The system will deploy AI-driven risk scoring to distinguish low-risk, straightforward filings from those that warrant deeper scrutiny. It includes predictive models to flag fraudulent refund claims before processing, and dynamic risk scores that update based on an assessee’s compliance history and past behaviour, the ministry told the panel. The expectation is that many of the current manual validation delays will shrink once the system is live.

For the current assessment year 2026-27, as of August 15, over 6.34 crore returns had been filed. About 6 crore had been verified, and roughly 4.59 crore processed, according to the e-filing portal.

Refund growth has been tepid. Between April 1 and August 10, the department issued over ₹1.43 lakh crore in refunds, up just 4% from ₹1.38 lakh crore in the same period last year, data from the Income Tax Department show.

The ministry also rolled out a foreign asset disclosure scheme for small taxpayers, though it provided no details on the response so far.