India’s income tax refunds fall 16% as fraud checks tighten nationwide

The government has reduced income tax refunds in India by 16% this fiscal year, primarily due to increasing difficulties in detecting fraudulent claims. On Monday, the Central Board of Direct Taxes (CBDT) published data indicating that gross direct tax collections increased by 2.4% to 13.9 lakh crore. At the same time, refund disbursements declined drastically from April to October 12.

The information showed that the total refunds declined from above ₹2.4 lakh crore last year to slightly more than ₹2 lakh crore this year. The fall is attributed to the fact that the authorities undertook automated validation and risk evaluation processes of returns, claiming an increased sum of returns refused. Authorities have assured that any income tax returns seeking a refund exceeding a specified amount are further checked before being cleared.

The threshold, according to the taxpayer, is different, resulting in a greater level of scrutiny for large claims. The new system is expected to curb mistakes and identify fraudulent applications for refunds before the money is disbursed, as stated by a top official.

Non-Corporate Refunds See Steep Fall

The most significant decrease has been in the refunds made to the non-corporate taxpayers. This year, the figure fell to 62,359 crore, whereas over 120,000 crore was recorded in the same time last year. This fall has contributed to the government's increased net collection. The net direct tax collections have increased by 6.3% to close to ₹11.9 lakh crore, due to a decrease in the outlay on refunds.

Officials stated that the verification process has lowered the disbursement rates while increasing transparency and minimizing claims of fraud. The actions involve cross-checking of taxpayer records, artificial intelligence-driven risk sift, and in-the-fly comparisons of the reported income with deductions made. This is because these steps are time-consuming, but they are designed to ensure the accuracy of refunds issued by the Central Processing Center (CPC).

Direct Tax Collections Remain on Track

Although refunds moderated the growth of direct tax collections, the total growth aligns with the government's expectations for the financial year. According to officials, corporate tax inflows are steadily increasing, with the profitability of major industries remaining high. In the meantime, tax collection through personal income tax is a pointer to current rate changes.

The government intends to continue improving its automated systems to strike a balance between efficiency and fraud prevention. The government has reiterated that taxpayers with valid claims will receive their money back after the verification procedures are complete.