The government today said over Rs 1.60 lakh crore has been locked up in disputes between the income tax department and taxpayers as on January, 2011.

"Out of the total arrears, the amount locked up in disputes between the income tax department and taxpayers as on January, 2011 is Rs 1,60,499 crore," Minister of State for Finance S S Palanimanickam said in a written reply to Rajya Sabha.

He further said various steps have been taken by the government to reduce unnecessary litigation.

These include increasing the monetary limit for filing of appeals by the income tax department before the Income Tax Appellate Tribunal (ITAT), High Court and Supreme Court.

With effect from February 9, 2011, the limits to file appeals before the ITAT, HC and SC have been increased to Rs 3 lakh, Rs 10 lakh and Rs 25 lakh from Rs 2 lakh, Rs 4 lakh and Rs 10 lakh, respectively.

"As a result, likely reduction in litigation at ITAT level is 13 per cent, and at HC and SC level 25-30 per cent," Palanimanickam added.

Besides, the Central Board of Direct Taxes along with the Directorate of Income Tax (Recovery) is monitoring the outstanding arrears of above Rs 10 crore, he said.

The CBDT fixes target for recovery of pending dues for every financial years. The target for recovery of arrears demand for the current fiscal is Rs 13,906 crore, Palanimanickam added.