Small mistake can lead to long delays in tax refunds

July 23rd, 2012 - 6:16 pm ICT by IANS  

New Delhi, July 23 (IANS) Tax payers should take precautions and avoid small mistakes while filing the returns as it usually leads to long delays in refunds, experts said.

Delay in tax refunds is one of the biggest grievances of majority of tax-payers. At times people do not get refunds for years because of a small mistake.

There are many reasons for such delays - like mistakes in filling up the forms, choosing wrong income tax return (ITR) form, change in residential address, unintentional error in bank details and delay in processing of return forms by the income tax department, especially the paper forms which are filed manually.

“A small mistakes like error in bank details, permanent account number (PAN) and residential address can lead to long delays. Sometimes as long as five to six years,” said Homi Mistry, partner, Deloitte Haskins & Sells.

He said technical problems and tardy processing of data by the income tax department were among the other major reasons leading to the delays.

“E-filing has made the processing of refund easier to some extent, but still there is a lot of delays,” Mistry told IANS.

Electronic filing of returns grew by 81.58 percent to 16.43 million in the financial year ended March 31, 2012. More than half of the returns filed online were from professionals and business people.

However, the increase from the salaried category was sharper. The number of ITR-1 forms filed online grew by 124 percent to 4.4 million in 2011-12, according to the Central Board of Direct Taxes (CBDT) data.

ITR 1 form is filed by people whose sources of income are only salary/pension, interest income and income/loss from one house property.

“E-filing has really picked up. We expect a significant increase in number this year as well,” said Mistry.

The CBDT has made electronic filing of returns mandatory from the assessment year 2012-13, for the salaried person earning more than Rs.10 lakh annually. This is likely to give a further boost to the number of people filing returns online.

While the government has been pushing for electronic filing of returns, there is no time limit set for refunds.

“There is no clarity. Sometimes people are getting refunds in three months. Sometimes, it’s six months, one year or even six years,” said Sudhir Kaushik, co-founder and chief financial officer of, one of the leading e-return intermediary.

Kaushik emphasised on the need for setting a time frame by the government for tax refunds and bringing more clarity in processing of data.

He said just 40 percent of the people claiming for refunds get it within a year. This means a majority 60 percent are compelled to wait for more than a year to get their money back.

The income tax department says refund is processed faster in case of electronic filing. However, there is no time frame set by the government to complete the process.

“Genuine tax payers suffer because of the delays. So the government must bring more clarity,” Kaushik told IANS.

Once return is filed, the income tax department verifies the information and processes it, and refunds the excess amount paid by the tax-payers. Ideally this process should be completed in four months.

The refund is either credited to the bank accounts of the tax payers through electronic clearing system or a refund cheque is sent to the mailing address mentioned in the return forms.

Interest rate on refund is six percent per annum, much lower than the interest paid by banks on term deposits and even the general level of inflation, which erodes the value of money. Banks currently offer 9-10 percent annual interest on fixed deposits.

Kaushik advised that people should plan their investments and allow the tax deductions in such a way that the situation of refunds would not arise.

“If you plan your investments properly, the situation of refunds would not arise. Salaried persons as well as business professionals can do it.”

(Gyanendra Kumar Keshri can be contacted at

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