The Income Tax department is taking proactive steps to address the issue of approximately 3.5 million tax refund cases currently pending. These initiatives include campaigns to guide taxpayers and an email-based demand management system that has already resolved over 140,000 cases. Delays in tax refunds primarily result from misinformation concerning bank accounts and Permanent Account Numbers (PAN). Experts suggest that the tax department could further enhance this process through regular bank account validation reminders and by considering alternative refund methods for non-resident taxpayers.
With around 3.5 million tax refund cases currently held up, the Income Tax (IT) department is taking measures to assist taxpayers and expedite the processing of refunds. The delays, primarily attributed to misinformation related to bank accounts and Permanent Account Numbers (PAN), have prompted the department to explore various solutions.
The history of income tax refund processing has been marked by challenges, particularly when the process was manual. In 2011, to streamline the system, the department transitioned to issuing refunds electronically. However, issues with incorrect bank account and PAN details have continued to plague the process.
Central Board of Direct Taxes’ Chairman, Nitin Gupta, recently acknowledged the issue during an interaction with reporters, stating that the department is in communication with affected taxpayers. He emphasized the department's commitment to ensuring that refunds are credited to the correct bank accounts promptly.
One significant initiative undertaken by the department is the Demand Management Facilitation System. This system sends an email to affected taxpayers, indicating that they will receive a call within three days from a specific number. Through this communication, the department aims to resolve issues related to tax refunds.
A call center in Mysuru has been instrumental in resolving cases of tax refunds. In the fiscal year 2023, over 140,000 refund cases were successfully addressed through this call center.
Amit Maheshwari, a Tax Partner at AKM Global, suggested that the tax department should periodically send reminders to validate bank accounts, as this is a common reason for refund delays. He highlighted that if the PAN is linked to the bank accounts, validation typically takes 1-2 days. However, in cases where validation is still pending, taxpayers can raise grievances through the tax portal.
Saurrav Sood, Practice Leader in International Tax and Transfer Pricing at SW India, recommended that in situations where refunds cannot be processed due to a lack of taxpayer information, notices or emails should be sent to request the necessary details. Additionally, goodwill campaigns could be organized to provide assistance in seeking refunds.
For non-resident taxpayers without bank accounts in India, an alternative method for processing tax refunds should be considered, experts suggest.
In the current financial year, the Income Tax department has issued refunds totaling Rs 1.5 trillion as of October 9th. In the previous fiscal year, FY23, the department issued refunds amounting to Rs 3.07 trillion, emphasizing the significance of resolving refund-related challenges for taxpayers.
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