If you are expecting a huge income-tax (I-T) refund, you may have to wait a bit longer than you earlier thought. To limit the government's fiscal deficit for the financial year at 4.8 per cent of gross domestic product (GDP), despite rising subsidies, the finance ministry has decided to go slow on I-T refunds, besides slashing Plan expenditure substantially.
According to officials, small I-T refunds are being cleared but the big ones - those running into lakhs of rupees - are being held back for now. That is because tax collections have remained subdued so far, making it difficult for the government to meet its direct-tax collection target of Rs 6,68,108 crore for 2013-14.
The direct-tax collection (net of refunds) in the April-September period this year increased only 13.33 per cent - compared with the projected 19 per cent growth - to Rs 2,84,339 crore. The refund claims during the period, on the other hand, increased a mere 3.13 per cent to Rs 53,568 crore.
"More than 80 per cent of the refunds are being given, but most of these are for small amounts," says a finance ministry official, asking not to be identified.
A further moderation in income-tax refunds is likely to be seen in the remaining months of the current year. In 2012-13 - the total refunds in the year had fallen about 13 per cent from the previous one to Rs 82,704 crore - too, the refunds had come down in the second half.
However, slowing down refunds may not be enough to contain fiscal deficit at 4.8 per cent this year, given that the rate of economic growth (without adjusting for inflation) is expected to be lower than that projected in the Budget, pushing up fiscal deficit (as per cent of GDP). Also, a rise in the government's expenditure on subsidies is exerting pressure on the non-Plan side - the petroleum subsidy is likely to be around Rs 1 lakh crore, against Rs 61,772 crore provided for in the Budget.
So, Plan expenditure could see a cut. Expenditure of ministries like rural development, health & family welfare and human resource development would be slashed heavily in the Revised Estimates for 2013-14. The communications & IT, home and power ministries are among other ministries to see significant expenditure cuts.
"Every effort will be made to lower wasteful expenditure, so that the fiscal deficit is contained - without compromising on GDP growth. Any funding related to election work or where funds have been utilised is not being reduced," says another official.
With issues related to the external sector on the wane, the finance ministry is focusing on growth and inflation. These are going to be priorities before the country goes to polls in 2014.
Officials say growth in the second half of 2013-14 would be better than in the first, especially with a slow growth rate in the same period last year (low base) giving statistical advantage. Lower current account and fiscal deficits will further support growth, they add.
The finance ministry expects the country's GDP growth rate for the year to be 5-5.5 per cent. Independent analysts, however, expect it to be less than five per cent.