Finance ministry to enable IT e-refunds

NEW DELHI, INDIA: The Finance Ministry is planning to move completely towards Electronic Clearance Service (ECS) for quicker and hassle free income tax refunds.

The Income tax department plans to link the permanent account number (PAN) with the bank account number. In the Union Budget 2013-14, Finance Minister P Chidambaram extended the refund banker system to refunds of more than Rs 50,000.

Though the RBI does not seem to be in favour of making PAN linkage mandatory for electronic transfer of all income tax refunds but if the Finance Ministry has its say over this matter, then all I-T refunds will be made directly to the taxpayer's bank account. The Finance Ministry believes, in this case, the scope of transferring the refund amount to a wrong account number will be eliminated.

"We want to move towards 100 per cent ECS (electronic clearance service). But for that, we will need both the PAN and the bank account number. The system will process the refund only when both the numbers entered by the tax department are correct. At the moment, RBI has some reservations and we are trying to convince them," a Business Standard report quoted an official as saying.

As of now, refunds worth Rs 70,000 crore have been given this year. In 2009-10 and 2010-11, refunds of about Rs 57,000 crore and Rs 73,000 crore were recorded respectively. Last year, the refunds were recorded at Rs 95,000 crore.

Under the refund banker scheme launched in 2007, refunds are provided to non-corporate taxpayers assessed all over India. The Income Tax Department has chosen the State Bank of India (SBI) as the refund banker. Currently, refunds can be generated through ECS and paper.

A taxpayer has to provide his/her bank account number and MICR (magnetic ink character recognition) code of bank branch and communication address, if he/she has selected the ECS as the mode of refund during the submission of income return.

Through the ECS mode, refunds are credited to the taxpayer's bank account within 24 hours of receiving intimation from the tax department.

Taxpayers who have opted for paper mode of payment will get their refund through cheque or demand draft. In this case, taxpayers have to provide their correct address. Through the paper mode, the cheque is dispatched within three days.