Does the lag go away if you toggle on/off the Bypass All  Effects by hitting the letter 'E' on your computer keyboard?
 
IF so, then one or more of your plugins loaded in the project is spiking your latency.  Generally, plugins that cause this are ones that use things like Look-Ahead processing, or otherwise chew up a bunch of CPU.  (Convoluted Reverbs, Linear Phase plugins, Boost11, Breverb2).
 
Anyways, some of the more robust effects plugins are really not meant to be used during the recording/tracking phase of a project - they are meant to be used in the mixing phase.  This is because they need a big ASIO buffer to give them the room they need to do what they do.  
 
So, during recording - a smaller ASIO Buffer Size (I use 128 as a balance - some folks use 64 or lower, depending on their hardware), while during recording - a much larger ASIO Buffer Size (1024 or 2048) works well for lots of folks.
 
So, if you are seeing the lag come and go as you are toggling the effects on or bypassed, then go through the plugins loaded into that particular project, and make sure they aren't spiking your latency.  If so, consider swapping out the ones adding too much latency, for simpler/leaner plugins - and then swap those others back in once you move on to mixing and have your ASIO Buffer Size cranked up.
 
If you have a WiFi adapter on your computer, these can also cause big DPC Latency spikes, and if so (running LatencyMon) can help ferret that out - and for folks with WiFi issues when running streaming audio applications such as Sonar, many of those folks will temporarily turn off or disable their WiFi and then launch Sonar and do their thing, and enable the WiFi again after finishing their Sonar session.
 
I hope the above helps, 
 
Bob Bone
 

The lag does not go away if I toggle the effects. Another thing to note is that I don't see ASIO driver in the preferences. I am using the Scarlett driver. I was using ASIO4ALL some time back but it had other issues so I had to stop using that one.
 
Im using a AT2020 mic and the signal is quite decent. I have tried to resolve the issue setting the mic gain at various levels. When I turn the input echo, there is a very significant lag that distracts the singer. The direct monitor on the Scarlett allows the singer to hear his voice but I have to pump up the mic gain to full strength to be able to hear through the direct monitor, else it feeble. And obviously doing this turns the red ring to go on and the signal clips in Sonar.
 
This is the first generation Scarlett. The driver site shows the driver is dated 2014.

Btw, I have WIFI, I have not tried turning it off......will try that as well, though I don't think that could be an issue coz there have been times when the WIFI was down and that did not make any difference.
 

Not sure if this will make a difference, but Focusrite does have a public beta site: http://beta.focusrite.com/.
 
I have been using the 3.2.2 driver with my 2i2. The big change is that "standard" buffer sizes are now used (powers of 2).
 
This have been available for over a year. Not sure why it is not official. I have been using this driver for close to a year and have experienced no issues.

I'm almost in the verge of upgrading my AI.I had the higher Scarlett models in mind but this issue is now turning me off.

My next interface will not be a Focusrite. And the pre amps and the way the gain is sort of funky is my biggest gripe. 
I had to buy a Joe Meek pre amp to solve my issue with the gain. It was either too quiet or too loud and clipping. 
Sounds like your experiencing the same issue. 

Just a couple of things I noted. Have you removed the asio4all driver from your computer? I found I actually had to delete it altogether to make the focusrite driver behave itself when I first bought my first 2i2. A number of people have had similar, and bizarre, happenings with it left on the PC. I had a 2i2 before my current 18i20, (which I love BTW). Also, are you pushing the monitor level right up to get high volume ? Direct all your mix to a single bus in order to turn it down, so you can crank up your monitor volume, and your input gain to the max before clipping. The only other thing I thought of was your headphones. There are headphones out there that require a decent pre-amp, and the 2i2 does not have a very high output, but I doubt that's your issue.

Cactus Music
My next interface will not be a Focusrite. And the pre amps and the way the gain is sort of funky is my biggest gripe. 
I had to buy a Joe Meek pre amp to solve my issue with the gain. It was either too quiet or too loud and clipping. 
Sounds like your experiencing the same issue. 

Exactly....I have to turn it too loud and deal with clipping or else it is too quiet. On the hunt for a better AI...RME or MOTU on my list.

MacFurse
Just a couple of things I noted. Have you removed the asio4all driver from your computer? I found I actually had to delete it altogether to make the focusrite driver behave itself when I first bought my first 2i2. A number of people have had similar, and bizarre, happenings with it left on the PC. I had a 2i2 before my current 18i20, (which I love BTW). Also, are you pushing the monitor level right up to get high volume ? Direct all your mix to a single bus in order to turn it down, so you can crank up your monitor volume, and your input gain to the max before clipping. The only other thing I thought of was your headphones. There are headphones out there that require a decent pre-amp, and the 2i2 does not have a very high output, but I doubt that's your issue.

Will try uninstalling ASIO4ALL today. I have been using a $200 AGK headphone for a long time, can't recollect the model number right now.Let me try replacing this as well.

Kind of late to respond back on this thread. I did try the beta drivers, and it started giving constant clicks while playing any audio on the PC, not just from Sonar. I reverted back to 2.5.2 and still living with the lag while recording vocals.  I'm preparing to get the RME UCX but wanted to make sure I tried all possible tricks to get this one working, but no luck so far !
I really dont know what the direct monitoring won't work unless I turn the mic gain too high ! Just too low gain on the mic inputs I guess ! ? This is scarlett 2i2 first gen btw.