E-filing of income tax returns has increased so substantially over the past two years that the income tax department believes paper filing of returns would soon become a negligible proportion of the total.

The department also says that e-filing, combined with its highly efficient and automated centralized processing facility in Bangalore, will free much of its resources to do the things the department should actually be doing, which is to track black money and conduct investigations into tax frauds.

Sanjai Kumar Verma, commissioner of income tax in charge of the Centralized Processing Center (CPC), said that 91 lakh out of the approximately Rs 3 crore returns filed in 2010-11 were e-filed. He expects the e-filed number to rise to between Rs 1.5 crore and Rs 2 crore this year.

The total number of returns filed this year may remain roughly the same as last year following the exemption from filing granted this year to those whose incomes are below Rs 5 lakh.

"This year we expect more than 50% of returns to be e-filed. In a few years, only those in remote areas and those who are not technologically savvy will remain with paper filing," Verma said. Efiling's attraction comes from a couple of reasons. One, it's become very simple. And if you can't do it yourself, a number of agencies are there to help you with efiling at nominal costs.

Two, e-filed returns are being processed much faster and therefore refunds are happening faster. "Prior to the CPC, refunds used to take 15-18 months. Now it's just 89 days. People are eager to get their refunds quickly, and that's encouraging them to efile," Verma said. The CPC is working to bring the refund time down to one month.

The CPC is an I-T department initiative in collaboration with Infosys that began in 2009. Infosys provides the technology. Everything related to the returns processing and tax refund, including a banking service and a postal service, is being brought under a single roof to increase the efficiency of the whole system.