Your wait for the income tax refund cheque could get longer. The government, racing against time to meet its budgeted revenue targets, may decide to defer dispatching the tax refund amounts until next year.
This money retained in the state's coffers will only help show a less weak government balance sheet by the end of year, and help keep the fiscal deficit within budgeted limits.
This window-dressing of sorts effectively could imply rolling over expenditure till next year. The government, sources, said plans to pay off these outstanding dues within the first quarter of the next fiscal — April to June 2015.
The government owes bulk of these refunds to companies, who pay taxes in advances every quarter based on projected incomes. The taxes eventually are netted out with their actual incomes.
Below par corporate profits this year have meant that companies have paid taxes much higher than what they would have paid on their actual incomes.
"The gap between the budgeted target and the actual collection s is huge and the collections are not improving due to the slowing economy, which is why the tax officials have been asked to go slow on the refunds to be issued especially in the last quarter of the current fiscal," a source close to the development said.
In the budget, the government had targetted to collect gross direct tax revenues — corporate income tax, personal income tax and wealth tax — of Rs 7.36 lakh crore, up 15% from the last year's Rs 6.36 lakh crore.
Till January, the government has been able to collect Rs 5,78,715 crore as gross direct taxes or about 70% of the target and staring at the possibility of falling short of estimates by a fair margin.
Keeping the fiscal deficit — a measure of the amount of money the government borrows to fund its expenses — within 4.1% of GDP is critical.
During 2012-13 and 2013-14, global credit rating agencies have been unsparing in their criticism about India's precarious public finances amid a looming threat of a sovereign rating downgrade.
Analysts said that rolling over tax refund payments to the next year is not an uncommon practice.
"A lot of these refunds which are being held are also the refunds due to corporate in terms of the advance tax that they submit," the source said.