During 2007, the then Finance Minister P. Chidambaram launched an innovative scheme called as Refund banker Scheme. It was first introduced in New Delhi and Patna. Since then, the scheme has been extended to other cities in India. Here, we take a look at the Refund Banker Scheme, its pros and cons.
Refund Banker Scheme:-A refund banker is a scheme, in which a particular bank has been sanctioned to issue refunds on behalf of the income tax department. The State Bank of India is the authorised banker of this scheme. The refunds are issued in the form of cheques/drafts or Electronic Clearing service (ECS).
Reason for Introduction of Scheme:The aim of launching this scheme was to speed up the refund process. After taking over as the Finance Minister, Chidambaram has been trying to make the refund process more transparent and quicker. With introduction of this scheme IT refunds will be dispatched by the bank within 3 days of receiving refund intimation from the income tax department.
Benefit :If you are an individual, you will get your refunds quicker. In case, you have opted for ECS mode of payment, you can get the credit in your bank account within 24 hours. If you are a corporate, you cannot avail of this facility. But in case, if the scheme is extended to corporates, faster refund means more cash to use for business purpose or cash for investment purposes.
With the launch of refund banker system, the finance minister has already clarified his intention of speeding up the refund process. So you can expect your refund very quickly, unlike the olden days, when it would take years to get your refund. Also, there are plans to extend this scheme to other banks, besides SBI. Once it happens, the refund process will speed up further.
Processing of Refund Cheque:-Once your refund is approved by the income tax department, your refund details are sent to the SBI. Under this scheme, the cash management department of SBI processes the refund, within 3 days of receiving your details. After this, they prepare your cheque/draft and dispatch it to your address. If you want to speed up the process further, you can opt for ECS, as you don’t have to wait for the cheque to arrive and again for it to clear. Only after your payment is disbursed, will the bank claim the amount refunded from the income tax. This will also help in doing away with the government bureaucracy, thus speeding up the refund process.
Drawback: Yes, there are a few drawbacks of this scheme. For one, you may close the bank account, which you have given to the income tax for claiming the refund. If that happens, the onus of updating your details lies on you. Moreover, your address may change before you receive your refund.
So it becomes imperative you keep the income tax department updated on your change in status. Also there can be mistakes in printing your name and/or account number on the cheque/draft. In case of ECS, your amount may get transferred to the wrong account number.
Refund Banker Scheme is a very good scheme. Yet it is imperative for the income tax department as well as SBI to follow the scheme very meticulously, to prevent any misuse of the scheme.