All income-tax refunds may directly land into your bank account, and that too in a shorter time, if the finance ministry has its way. The catch is that the Reserve Bank of India (RBI) may put a spanner in the works.
A Permanent Account Number (PAN) linked with the bank account number, just like Aadhar, is integral to the Income Tax department's plans. It wants the central bank to facilitate this ceding so that the scope of the amount being transferred to a wrong account number is eliminated.
However, RBI is not comfortable with the idea of making PAN linkage mandatory for electronic transfer of all income tax refunds.
"Next we want do is move towards 100% ECS (Electronic Clearance Service). But for that we will need both the PAN and the bank account number. The system will process the refund only when both the numbers entered by the tax department are correct. At the moment, RBI has some reservations and we are trying to convince them," said a finance ministry official.
Another official said the tax department was not asking RBI to make PAN mandatory for all bank accounts. "We are concerned with only those 35 million bank account holders who have a PAN card. So it should not be a problem."
Income tax refunds of about Rs 70,000 crore have been given so far this year. Last year refunds were to the tune of Rs 95,000 crore. Refunds of about Rs 57,000 crore and Rs 73,000 crore were issued in 2009-10 and 2010-11, respectively.
At present, refunds are provided through the refund banker scheme, launched in 2007 by Finance Minister P Chidambaram, to non-corporate taxpayers assessed all over India. State Bank of India (SBI) is the refund banker to the Income Tax department. Details of refunds are forwarded by the department to SBI. The country's largest lender processes the refunds and sends the refund intimation to the taxpayer.
Refunds are generated in two modes--ECS and paper. If the taxpayer has selected mode of refund as ECS at the time of submission of income return, his/her bank account number and MICR code of bank branch and communication address are mandatory.
For taxpayers who have not opted for ECS refund will be disbursed by cheque or demand draft. For generation of refund through paper cheque bank account no, correct address is mandatory. In the ECS mode refunds are usually credited to the taxpayer's bank account within 24 hours of receiving intimation from the tax department, while in case of paper refunds it is dispatched within three days.
In Budget 2013-14, the finance minister extended the refund banker system to refunds of more than Rs 50,000.