In a bid to make tax collection paperless and hassle-free, Centre will start E-refund of income tax from April, having put in place E-filing of tax deduction at source and tax information network.

Initially, E-refunds upto Rs 25,000 would be credited directly to tax payers' bank accounts on a pilot basis in 13 cities, including the four metros, and thereafter it would be replicated across other centres as well, Minister of State for Finance Shripad Naik told PTI in New Delhi.

"Finance Minister Jaswant Singh has approved the scheme for E-refunds in order to make the whole system hassle-free for the taxpayers," he said.

Comptroller and Auditor General and Controller General of Accounts had already approved the electronic credit system, originally mooted by the Reserve Bank of India.

Asserting that it was the endeavour of the government not to delay refunds, Naik said the taxpayers would have to necessarily furnish their bank account number in this regard.

This step follows the recent approval for electronic filing of tax deduction at source by employers and engaging another intermediary for issuing permanent account numbers, apart from the present entity UTI Investor Services.

"National Securities Depository is likely to be empowered since it is already being given the mandate to manage the tax information network," Naik said.

Almost 500,000 applications are pending for issuance of PAN cards. As many as 28,52,152 applications have been recieved till January 2 and about 23 lakh (2.3 million) PAN cards had been despatched, Central Board of Direct Taxes member B Swarup said.

Naik said income tax consultants and tax advocates had been mandated to put their electronic signature on behalf of their clients.

"It is possible to dematerialise challans and TDS certificates, thereby eliminating the need to enclose these with the (income tax) returns," he said, adding for the electronic filing of TDS, there would be user charges.

Under TIN, recommended by Vijay Kelkar task force, about 10,500 bank branches including that of HDFC Bank, ICICI Bank, UTI Bank and IDBI Bank would be connected.

TIN envisages E-filing of TDS, on-line tax accounting system and computerisation of annual information returns.

"On-line tax accounting will reduce the time for transfer of tax collection from banks to government account to two days from the present 15-20 days," the minister said.

Availability of on-line information of tax payments would enable timely monitoring of tax collection and necessary follow-up action, he said.

Naik said already two pilot studies of the proposed system had been completed in all the metros.

He said creation of intelligent database of high value financial transaction and their integration with information relating to processing of returns would "create a major anti-tax evasion tool inducing higher voluntary tax compliance and increase in revenue."

These initiatives form part of major computerisation plan of the I-T department for which the Cabinet had approved an outlay of Rs 252 crore (Rs 2.52 billion) for three years.