IT refunds hit new high of Rs 1 lakh cr, what's the secret?

Income tax refunds for the financial year ending March 2012 hit a new high of nearly Rs 1,00,000 crore (Rs 1 lakh crore), up 32 percent from the previous year, according to a report in Indian Express. That’s despite total income tax collections of Rs 4.94 lakh crore, which was short of the revised target of Rs 5 lakh crore.

So, why so many refunds? Well, one possible reason is that several entities and individuals had paid advance tax, against which income must have come in lower than anticipated. That would have led to a lowering of their tax obligations.

In addition, with the adoption of e-returns, the time taken to process refunds has reduced sharply.

The report says that this financial year, refunds could be higher at Rs 1.2 lakh crore as the number of those who file e-returns increases. Tax authorities have made it mandatoryfor individuals earning an annual income in excess of Rs 10 lakh to file their returns online from the current financial year. Until now, an individual with income above 10 lakh had the choice of filing income-tax returns either online or through an auditor/chartered accountant.

In 2011-2012, 1.64 crore tax payers out of a total of more than three crore tax payers filed e-returns. In 2012-2013, that number is likely to increase to 2.5 crore, according to the newspaper.