Direct tax refunds down 10% amid Covid-19 pandemic, says CBDT

Only withheld refunds where assessee reply is awaited, says CBDT

Direct tax refunds are down 10 per cent, compared to the same period last year, despite the central government’s efforts to expedite these amid the Covid-19 pandemic.

Refunds, or cash outflow from the income-tax (I-T) department, stood at Rs 74,000 crore up to July 18 this fiscal, against Rs 82,000 crore worth of refunds disbursed in the same period last year.

According to a senior Central Board of Direct Taxes (CBDT) official, refunds have been held up in only cases where response is awaited from assessees and/or where cases  have been picked up for scrutiny.

“Refunds are held up where reply is awaited. Besides, there are cases where tax demands are there. Refunds can be blocked during scrutiny according to a provision in the I-T law,” explained a CBDT official.

Some tax officers attribute the decline to thin attendance during lockdown, delaying clearance of large refunds that require officers’ approval.

The sum also includes adjustment made by the department for outstanding demand for other years.

“Whenever there is a tax demand pending against a taxpayer for earlier years, the refund is processed but adjusted against earlier demand, which might have been challenged by the taxpayer before appellate authorities. Refunds are issued technically in these cases of adjustment, but do not result in actual outgo from the government,” said the official quote earlier. 

Over Rs 35,000 crore worth of refunds have been stuck where cases have been held up for scrutiny.

Approximately two-third of refunds pertains to companies, one-third to individual taxpayers.

According to an official release by the I-T department last week, refunds worth Rs 24,603 crore were issued to individual taxpayers in 1.98 million cases; Rs 46,626 crore worth of corporate tax refunds were issued in 145,000 cases to companies during this period.

Overall direct tax collections — net of refunds — fell 23.4 per cent to Rs 1.4 trillion as of July 7, compared to Rs 1.83 trillion in the comparable period last year.

A tax expert pointed out that, “Based on practical experience, most of these refunds issued are of smaller amounts, whereas there is still hesitation in issuing large refunds. Numerically also, the average refund amount for a non-corporate taxpayer is approximately Rs 1.24 lakh, whereas for a corporate taxpayer, the average refund amount is Rs 32.15 lakh,” he added.
 

However, other tax consultants pointed out that the pace of issuance of refunds by the I-T department has improved over the past one month. “In recent months, the refund process has been made faster. Refunds of a few are being credited to bank accounts within 15 days of filing I-T returns (ITRs). The digitisation of returns processing has made this possible,” said Rajat Mohan, partner, AMRG & Associates.

The I-T department has urged taxpayers to provide immediate response to emails from the tax department. “Many taxpayers have submitted their responses electronically for rectification, appeal effects or tax credits. These are being attended to in a time-bound manner,” the tax department said.

Meanwhile, paving the way for clearance of pending tax refunds, the I-T department has announced a one-time relaxation scheme for verification of electronically filed tax returns for the past five years. The CBDT has relaxed the timeline for verification of the past five years’ returns, beginning 2014-15 that became invalid, up to September 30, and processing of those up to December 31.  Several refunds have been stuck on account of non-filing of the ITR-V form, invalidating the returns filed by the taxpayer, leading to non-compliance by them.