Delays in income tax refunds shoot up- Business News
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Delays in I-T refunds shoot up

The delay in processing tax refund claims by the Income Tax (I-T) department has shot up, causing more inconvenience to taxpayers and a higher interest outgo for the government.

  • New Delhi,  March 28, 2011  
  • |  
  • UPDATED   10:14 IST

The delay in processing tax refund claims by the Income Tax (I-T) department has shot up, causing more inconvenience to taxpayers and a higher interest outgo for the government.

According to the latest report by the Comptroller and Auditor General of India (CAG), the pendency rate for tax refund claims has gone up to 40.4 per cent in 2009-10 from 22.5 per cent in 2005-06. In simple terms, this means that while 77.5 per cent of the tax refund claims were cleared in 2005-06 only 59.6 per cent of such claims could be processed in 2009-10.

The backlog in refund claims has been rising steadily during the last five years. Official figures show that while 5.7 lakh refund cases were pending in 2005-06 the number of such cases has jumped to 19.4 lakh for 2009-10. While the infotech initiative taken by the I-T department was expected to drastically reduce the pendency rate of tax refund claims, this has not happened, apparently because the systems have not fully stabilised as yet.

{mosimage}CAG officials are of the view that the I-T department needs to do much more to reduce tax refund delays as prompt refunds instill confidence among taxpayers and increase tax compliance. These delays in processing refund claims have also led to the government having to fork out increased amounts as interest on the amounts that have been held up with the I-T department.

 Refund woes

  • While 5.7 lakh refund cases were pending in 2005-06 the number jumped to 19.4 lakh for 2009-10
  • Delays have also led to the govt having to fork out more amounts as interest on money held up with the I-T department
  • Govt refunded Rs 57,101 cr in 2009-10, including interest of Rs 12,951 cr
According to the CAG report, the government has refunded Rs 57,101 crore in 2009-10, which includes interest to the tune of Rs 12,951 crore. The interest works out to as much as 22.7 per cent of the total refund amount. This could have been reduced if the tax administration had been more efficient in processing the refund claims.

The interest on refunds has shown a progressive increase during 2006-10 at a pace that was higher than that of the growth in refunds. In 2008-09, the amount of refunds registered a dip but the interest payments went up, which reflects the long delay in clearing claims.

A taxpayer becomes eligible for a refund if the tax paid by him or her exceeds the tax amount that was due in the year. The refund process gets initiated with the claim contained in the annual tax returns submitted by the taxpayer, which is then examined by the assessing officer to see if it is actually eligible. The claim is finally disposed of when the voucher is issued to the assessee through an authorised bank.

I-T officials said delay in refunds also take place because assessees do not fill their bank details or PANs correctly, while in some cases the assesses themselves file their claims late. However, CAG officials point out that even the I-T department's target of settling refund claims within four to six months is longer than international standards, which range from 24 days to six weeks. The average time taken for processing the claims works out to be 10 months after which it takes another 40 days to issue the voucher, making it a good 12 months on an average for the claim to come through.

Courtesy: Mail Today