The government paid out a staggering Rs 40,000 crore as income tax refunds in the last financial year and Mumbaikars got more than 30 per cent of it.

Rs 40,000 crore represents 15 per cent of the total income tax collected across the country for 2006-07. So why did the government collect it in the first place? Was the refund, given out to nearly 44 lakh assessees, the result of skewed rules or smart saving plans by individuals and corporates. Or a bit of both?

In Mumbai alone, Rs 12,850 crore was returned to income tax payees in 2006-07, the highest for the year. These details were made available by the income tax department on an application filed under the Right to Information Act by DNA.

The department said it issued personal refunds to 4,381,905 assessees, totalling Rs 39,754 crore. According to its Online Tax Accounting System, the total IT collection for 2006-07 was Rs 2,64,039.2 crore.

Thus 15.05 per cent of the total income tax collected for the '06-07 fiscal was returned, reflecting the complicated nature of tax collection rules in India.

The fact is IT refunds have been steadily climbing year after year, despite the government's announced efforts to simplify tax rules and minimise trouble for the assessees.

In 2005-06, the number of refunds issued was 4,40,3556. The figure went up by almost 50,000 refunds in 2006-07 to 4,45,2988. And during the same period the amount refunded went up by almost Rs 10,000 crore.

Refunds have been increasing by leaps and bounds along with whopping increase in advance payments by corporate houses and personal income tax assessees.

While efforts are under way to simplify income tax rules, the government is also fast expanding its 'Refund Banker Scheme' to further facilitate IT refund. Under the scheme, tax payers can provide their banks details and receive the refunds credited electronically.

The department, however, said it had no centralised information on the IT refunds pending for 2006-07 "as it will be available with the assessing officer concerned." It also refused to give details of the interest paid for delayed refunds, saying it was not in possession of any such data.