With slowing economic growth impacting tax revenue collections, the finance ministry is proposing to make good this shortfall by slower refunds. Signaling this, finance secretary R.S. Gujral, who was addressing the annual income-tax (I-T) commissioners’ conference, directed the field staff to go slow on I-T refunds, which had aggregated a record Rs. 95,278 crore in FY 2011-12. Direct tax refunds jumped 30% last year from Rs 74,000 crore in FY 2010-11. This fiscal, due to a sharp increase in online tax filings, the government was expecting a higher outgo on account of tax refunds.
Tax Refund Claims: Wait-and-See Won’t Help
Note that there is no law that specifies the time limit around the payment of refund to tax payers. In June 2010, the Income Tax Department issued a Citizens’ Charter – a declaration of the government’s commitment to excellence in service to tax payers. As per this document, the department stated that it would try to abide by a norm whereby refund, along with interest arising from processing under section 143(1), will be received the taxpayer within 9 months of the end of the month in which application/request is received.
Income Tax Refund: Take Control
Some basic questions which all taxpayers should ask themselves are:
- Why am I receiving income tax refund?
- Why, in the first place, did I leave money on the table for the income tax department?
- Why did I overpay if there was a way to avoid the hassle of following up with the I-T Department?
One loses 7-8% interest on the refund amount till the time of return filing because the extra tax amount is sitting with the revenue department as soon as it was deducted. This loss increases by another 5-6% as it will take some time since ITR filing for the refund money to be in your hands. So, on a refund of Rs. 50,000, one may give away Rs. 6000 to the government. While some people may see the refund cheque as a bonus, it is actually a negative saving on your hard-earned money.
The government pays only 6% interest for the period of delay in refund. That too, is taxable. Below are some things you can implement to avoid the pitfall of claiming refund:
- Claim all your allowances from the employer in time
- Provide receipt of investments and expenses to the employer in time
- Claim reimbursement for all the perquisites well in time so that the correct TDS is deducted
- Get the provisional home loan interest certificate from the bank before the end of Financial year
If you still end up claiming refund, file your ITR as early as possible. Moreover, the government processes the electronically filed returns faster; hence the chances of getting your refund early are more. So, eFile is worthwhile! To get a tax optimized structure that keeps this money in your pocket, opt for Tax Optimizer, an annual subscription which includes access to a dedicated CA.