Government withholds I-T refunds worth Rs 43.5k cr to earn interest of Rs 15k cr

New Delhi: A cashstrapped UPA government seems to be withholding income tax refunds to multiply its own income. The government has been earning more than Rs 15,000 crore annually by delaying refunds to the tune of Rs 43,500 crore over the past four years.


And if one discounts the interest outgo — the amount the government has paid to assesses at the time of refunds — it still has managed to make Rs 16,200 crore between 2007-08 and 2010-11 .

According to finance ministry’s recent submission before the Public Accounts Committee, the statistics provided since 2007-08 show the government has earned Rs 43,511 crore as interest on delayed refunds. The income from this interest went up from Rs 4,400 crore in 2007-08 to Rs 16,800 crore in 2009-10 , and was more than Rs 16,000 crore in the next fiscal.

At times, the delayed refunds are also seen as an attempt by the finance ministry to shore up its revenue. For instance, this year the government said it has fallen short of Rs 4,422 crore in the budget estimates (BE) of its direct taxes for 2012-13 .

However, sources said the Central Board of Direct Taxes (CBDT) had started delaying refunds for big amounts only to show it was close to the budget target. The BE for the current fiscal was fixed at Rs 5.70 lakh crore. But according to the revised estimates released by the government for 2012-13 , the gross collection is around Rs 5.65 lakh crore, which works out to a shortfall of Rs 4,422 crore.

During her deposition before the Public Accounts Committee on why Parliament’s approval was not taken before making expenditure on interest outgo, CBDT chairperson Poonam Kishore Saxena said, “The Income Tax Act makes no distinction between the refund and the interest on it. The interest is simply calculated by us at a particular rate at no discretion.”

In what appears to be CBDT’s bid to hide the rate of interest it offers to its taxpayers , in comparison to what it earns, Saxena said: “The refund which is being given to a person, we do not indicate that this is refund and this is part as also interest of it. It is just a whole quantum which does include the interest part. But there is no distinction. It is just a refund of tax plus interest .”

She added, “In fact, for the past financial year and even till date we have not actually got the calculations or what was the interest on the amount of refund.”