The process of refund of income tax is very important. This is because the time period by which the refund is received impacts the activity of an individual or an entity, and delay in refund locks up this amount.
There has been a gradual progress in disbursing refund proceeds. Earlier they were paid through cheques, taking a longer time to realise. There were various reasons for delays but as a result money was getting locked up for quite some time. The system has since moved to an electronic way of making repayment. Now the tax department takes the bank account number and other details of the taxpayers so that the refund can be directly sent to the bank account.
There are efforts to ensure quicker tax refunds and instantaneous repayment of dues to the taxpayer. There are efforts to adopt one of the transfer systems whereby the money gets credited almost instantly into the account of the taxpayer, saving a lot of time and effort. This will make the process smoother and easy to understand for the taxpayer.
One of the important impacts of such a move would be that there is a quicker disbursal of refunds. When the refund amount is available quickly, the taxpayer can put it to better use. This ensures that the money is rotated back into the economy without getting held up. Another impact could also be that a person is encouraged to pay the amount as taxes without much of a worry because they know that if they have paid some extra amount, then it will be returned quickly.
Work to be done
While this scenario sounds like a taxpayer’ dream, there is still a lot of work to be done. Just having a fast system for payment does not mean quick return of the money because their processing itself is extremely slow. Entire system has to be overhauled so that the assessment procedure is completed quickly and smoothly.
The author is a certified financial planner.