Income tax departments schemes for speedy issuance of I-T refunds seem to be paying off well. Income tax refunds have picked up encouragingly during the first eight months of the current fiscal by 6.7 per cent compared to the corresponding period a year ago. As on November 27, 2010, tax refunds stood at Rs 38,320 crore as against Rs 35,915 crore last year, official sources told The Indian Express.

Refund for the year 2009-10 stood at Rs 58,046 crore while that for 2008-09 stood at Rs 41,445 crore. In 2007-08, income tax refunds stood at Rs 40,965 crore. Refund is paid by the department to assessee when the amount of tax paid exceeds the amount of tax payable. The department pays simple interest at a prescribed rate on the amount of such refunds.

Pendency in such refunds leads to outflow of revenue from the government by way of interest. The government has paid Rs 12,565 crore by way of interest on the refunds pending from 2005-06 to 2008-09.

The department has been working towards making the system of refunds smooth. For the purpose, it has established, what is called, Central Processing Centre (CPC), that helps in processing electronically filed returns in the country. A CPC at Bangalore started functioning fully from the current fiscal and the government plans to set up two more such centres.

Apart from expediting the entire process of filing returns and issuing refunds, it has encouraged more tax payers to resort to electronic filing of returns.

The processing of tax returns is a low-skilled copious activity due to which the process of refund and follow up action on recovery of underpayments becomes slow. This has been taxing the department in terms of interest payment on delayed refunds and taxpayer dissatisfaction.