In an attempt to make income tax (I-T) refunds faster and time-bound, the government has said if the taxpayer has contested the demand but no response is received from the department within 30 days, the refund would be made. At the same time, in such a case if any liabilities arise, the assessing officer would be held responsible for it.
Industry watchers feel that finance minister Arun Jaitley would unveil steps to streamline and iron out procedural issues to avoid unnecessary litigation related to I-T refunds in the Budget on February 29.
“In cases where the taxpayer has contested the demand, CPC (centralised processing centre) would issue a reminder to the jurisdictional assessing officers about the contention of the taxpayer, asking them to either confirm, or make appropriate changes, to the demand, within 30 days. In case no response is received from the jurisdictional assessing officer, within the stipulated period time, CPC would issue the refund without any adjustment. The responsibility of non-adjustment of refund against outstanding arrears, if any, would lie with the assessing officer,” the Central Board of Direct Taxes (CBDT) said in a January 29 order.
Similarly, when there is no response from the taxpayer within 30 days, CBDT has directed CPC to adjust demand against refund due and issue balance refund, if any, the order has said. Earlier, CBDT had directed prompt issuance of refund up to Rs 5,000 without any adjustment of outstanding arrears.
“Adjustment of refunds against outstanding demands, has been a matter of concern for the taxpayers for some time now. The recent instruction regarding refund process are a move in the right direction,” said Vikas Vasal, partner (tax) at KPMG in India.
Meanwhile, tax refunds made more than six months after the returns are filed will come with an annual interest of 12% and those with delay by over a year will be paid interest up to 18%, if the government accepts the recommendations of a high-level committee headed by R V Easwar.
Currently, the interest on refunds can’t exceed 6%, a “low rate” which, according to the Easwar committee, doesn’t fully offset the opportunity cost of money to the taxpayer, while serving as a “perverse incentive” for the taxman to delay refunds.
“Justice Easwar Committee has also recommended that the tax refund process should be streamlined and the procedural issues be ironed out to avoid unnecessary litigation. It is expected that suitable changes are likely to be made in the Budget to further smoothen the refund process,” Vasal said.
The remarks of the Easwar Committee on simplification of the tax regime — come at a time when the speed of tax refunds have improved in recent years thanks to the Bengaluru-based centralised processing centre that allows e-returns.