Refunds Are Where Trust Lives

Somewhere in Bengaluru, at the Centralised Processing Centre, roughly twenty-seven lakh income tax returns crossed the ninety-day mark this year without a refund being released. That figure surfaced quietly in the thirtieth report of the Parliamentary Standing Committee on Finance, alongside a much larger and older number: outstanding direct tax arrears of Rs 47.42 lakh crore. Both numbers, read together, describe the same underlying question. How much friction can a modern tax administration absorb before the citizen starts noticing?

The most watched interaction is the refund

For most Indians who file a return, the refund is the entire relationship with the tax department. Assessment, penalty, appeal: these belong to a tiny minority. The refund does not. It is the one moment every year when a citizen looks at the state and asks whether her money is coming back. When that moment slips from thirty days to ninety, and from ninety to something no one is quite willing to publish, a small quiet trust erodes. Not dramatically. Just steadily.

According to the report in CAclubindia, the panel acknowledged the cause plainly:

"partly due to intensified verification measures introduced by the Income Tax Department to detect fraudulent deduction claims."

That is a real reason. It is also not the whole reason.

Scrutiny got smarter, but also wider

Third party data has grown faster than trust in it

The AIS, the expanded 26AS, the NUDGE nudges, the section wise risk flags: all of these were built to give the department eyes it never had. The eyes work. But every extra data field also becomes an extra mismatch, an extra flag, an extra manual look. Fraud detection scales up, but so does false positive burden. A refund that would once have moved in three weeks now waits for a person to look at a screen and confirm that a Section 80G donation actually happened.

Volume did not shrink; scrutiny only widened

Filings for the last assessment year crossed 8.8 crore. The verification net widened while the queue kept lengthening. When you tighten a filter on a river that is getting fuller, the river does not slow down. It backs up.

The delay is not free for the exchequer either

Section 244A quietly meters the cost

Every rupee of refund that misses its window earns interest at half a per cent a month for the taxpayer. The government is right to check claims. But every additional day it holds an honest refund, it also holds an accruing liability. Twenty seven lakh honest cases is not a rounding error. It is a compounding one.

The arrears mirror explains something too

The 47.42 lakh crore of outstanding direct tax demand is not a symmetric problem. Much of it is old, contested, or, as the department itself concedes, largely unrecoverable. The lesson is uncomfortable. The system has become very good at generating additions and very slow at closing loops, whether the loop is a refund or a demand. Both sides of the ledger are getting longer.

Three moves worth making now

Tier the scrutiny, not the taxpayer

Not every refund needs the same lens. A pensioner claiming standard deduction and a first year filer claiming a large HRA against a small salary do not sit in the same risk band. Risk band routing, published as policy, would let the vast majority of small refunds flow without a human blink, and concentrate assessors where the money actually is.

Publish a service standard, and pay against it

The department already has an internal ninety day norm. Make it external and measurable. If a refund slips past that line without a defensible risk flag, Section 244A interest should be treated inside the system as a real cost, not an accounting entry. Nothing focuses an organisation like a metered price on delay.

Report the trust cost the way we report the fraud saved

Every year, the department publishes fraud detected and revenue protected. Both are legitimate metrics. Neither is complete without its twin: honest refunds delayed, and days lost per honest filer. Institutional productivity, as any serious student of public sector organisation will insist, requires measuring what you break as carefully as what you build.

The quiet takeaway

Twenty seven lakh delayed refunds is not a scandal. It is a signal. It tells us that the country's largest revenue machine has grown a new muscle, faster detection, without yet growing the reflex, faster release. The fix is not to lower the guard. It is to sequence the guard. A tax system is not judged only by the fraud it catches. It is judged by the honest citizen who filed early, matched every number, and is still refreshing a portal in July.

#IncomeTax #TaxAdmin #CBDT #RefundDelay #PublicSector #TaxPolicy #India

From your desk to the FM - KarSetu

There is a particular kind of satisfaction — quiet, almost private — that comes from watching something you crafted at your own desk travel all the way up and enter the public domain at the highest level. On 20th March 2026, the Hon'ble Finance Minister of India, Smt. Nirmala Sitharaman, released Kar Setu — the eBook and booklet on Interplay and Transition FAQs from the Income Tax Act, 1961 to the Income Tax Act, 2025.

What Kar Setu Is

India is undergoing one of the most significant legislative transitions in its fiscal history. The Income Tax Act, 1961 — a statute that governed the tax lives of every Indian for over six decades — is being replaced by the Income Tax Act, 2025. This is not a cosmetic rewrite. It is a restructuring of 536 sections, affecting over 700 field offices, tens of thousands of tax officers, and millions of taxpayers and practitioners across the country.

The question that every officer in the field, every chartered accountant advising a client, every taxpayer filing a return would inevitably ask is: What changes? What stays? What do I do differently starting April 2026?

Kar Setu was built to answer that question.

The name itself — Kar Setu, a bridge of duty — was chosen deliberately. This is not a commentary or an academic paper. It is a bridge. A structured, FAQ-based guide that maps the interplay between the old Act and the new, so that the transition is navigable rather than bewildering.

The Four Months Behind It

What the public sees today is a finished product — clean, structured, authoritative. What they don't see is the four months that preceded it.

Sixteen sub-committees were constituted to cover every major area of the Act. Each committee comprised officers who live and breathe these provisions daily — assessment, appeals, penalties, TDS, international taxation, search and seizure, and more. The coordination happened out of the Directorate of Organisation and Management Services (DOMS), CBDT, where I serve as Member Secretary to the Guidance Note Committee for the ITA 2025 implementation.

There were drafts. Many drafts. There were rounds of review where a single FAQ would be debated, reworded, cross-referenced, and debated again. There were late-night iterations where you are staring at Section 247 of the new Act and tracing its lineage back to Section 143(3) of the 1961 Act, making sure the transition guidance is precise enough that a young ITO in a mofussil town can rely on it.

This is the unglamorous work of governance. No stage, no spotlight. Just a desk, a screen, and the knowledge that if you get this wrong, the confusion will cascade across the entire tax ecosystem.

Why This Matters Beyond Tax

I have spent fifteen years in the Indian Revenue Service. I have done transfer pricing investigations, ITAT litigation, international tax advisory, and policy work. I have studied at Columbia and Harvard, advised at the UN, and consulted for the G20. But I will say this plainly: there is something uniquely grounding about building a document that will be used by an Assessing Officer in Dharwad and a Senior Partner at a Big Four firm in Mumbai on the same day, for the same purpose.

Kar Setu is a leveller. It doesn't distinguish between the officer who needs it to process a case and the practitioner who needs it to advise a client. It serves both. That is what public goods are supposed to do.

In an age where we talk endlessly about AI in governance, digital transformation, and technology-led reform, it is worth remembering that sometimes the most impactful thing a government can produce is a well-structured document that answers the right questions clearly. Not an app. Not a dashboard. A document — researched, debated, refined, and released.

The Moment

When the Finance Minister releases something you have been working on for months — something that started as a working file on your desktop, went through committee after committee, was revised at 11 PM on a Thursday, and finally emerged as a polished eBook — there is a moment. It is not dramatic. It is not cinematic. But it is deeply, quietly, satisfying.

You don't need anyone to tell you the work mattered. You know. Because you watched it travel from your desk to the hands of the person who stewards this country's fiscal policy. And now it is in the public domain, serving the people it was always meant to serve.

Kar Setu is live. The bridge is built.

India's First Global AI Summit

The first-ever global AI summit hosted in the Global South just kicked off in Delhi. And I was there on the expo floor yesterday.

Bharat Mandapam was buzzing — 300+ exhibitors from over 110 countries, 20+ Heads of State converging later this week, and Sundar Pichai landing in Delhi for a keynote. The India AI Impact Summit 2026 is massive by any measure.

Which of these AI tools can actually survive contact with Indian government reality?

Not the pitch deck reality. The ground reality. The 10,000-user, legacy-system, compliance-heavy, can't-afford-downtime reality.

With that lens, I walked the expo floor for hours. And seven solutions stood out — not because they had the flashiest booths, but because they addressed problems I deal with every single day.

Here's what I found.

1. Deloitte PRAGYA — When Consulting Meets AI at Scale

Deloitte's PRAGYA platform wasn't just another enterprise AI dashboard. What caught my attention was how it bridges the gap between strategic advisory and operational execution.

In government, we've seen no shortage of consulting reports that gather dust on shelves. What we need are tools that take a recommendation and help you implement it — across hundreds of offices, with varying levels of digital maturity, in real time.

PRAGYA seems to be built for exactly that kind of complexity. For large-scale government transformation programs — the kind where you're implementing a new Act across an entire department — this is the type of AI-assisted project intelligence that could change how we manage reform.

2. LKS In-House Litigation Management — This One Hit Home

If you've ever managed litigation portfolios in government, you know the pain. Thousands of cases. Multiple courts. Overlapping deadlines. Paper trails that would fill a warehouse.

I've spent years in ITAT litigation and transfer pricing disputes both in Mumbai and Amritsar, including cases worth hundreds of crores. The single biggest bottleneck isn't legal strategy — it's tracking, coordination, and institutional memory.

LKS has built an AI-powered litigation management system designed for in-house legal teams (as of now). Automated case tracking, deadline management, outcome analysis, and pattern recognition across your case portfolio.

For the Income Tax Department — which handles lakhs of cases across the country at any given time — a system like this isn't a luxury. It's an operational necessity. The question isn't whether we need it. It's how fast we can adapt it to our scale.

3. Smoothtalk AI — Virtual Calling That Could Transform Citizen Services

Picture this: a taxpayer in a Tier 3 city has a query about their assessment. Today, they call a helpline, wait, get transferred, explain their problem three times, and maybe — maybe — get a resolution.

Smoothtalk AI is building virtual calling agents that can handle these interactions with natural, human-like conversation. Not the robotic IVR menus we've all grown to hate. Actual contextual dialogue.

For any government department that handles millions of citizen queries — and the Income Tax Department certainly does — this technology could fundamentally reshape the service delivery experience. Imagine every taxpayer getting an intelligent, patient, context-aware agent on the other end of the line, available 24/7, in multiple languages.

We're not there yet. But the demo I saw suggests we're closer than most people think.

4. Government AI — A UK Perspective on Sovereign Deployment

This one was fascinating for a different reason. Government AI is a UK-based platform built specifically for public sector use cases.

What made me stop and engage wasn't just the product. It was the philosophy. They've clearly thought through the unique constraints of government — compliance requirements, audit trails, data sensitivity, and the fact that "move fast and break things" is not an acceptable operating principle when you're dealing with citizens' data and rights.

Seeing how another country approaches sovereign AI deployment gives useful comparative perspective. At CBDT, as we think about integrating AI into tax administration, understanding global best practices — not just Silicon Valley practices — is essential. The UK's approach to government-specific AI platforms is worth studying closely. They infact have their own courses on iGOT platform.

5. ACTUALITY — On-Premise Deployment for Data That Can't Leave the Building

This is the unsexy but critical conversation that most AI summits skip.

Every AI vendor will tell you their cloud solution is secure. And maybe it is — for a private company. But when you're dealing with taxpayer data, national security information, or sensitive government records, "trust our cloud" is not sufficient.

ACTUALITY offers on-premise AI deployment. Your data stays on your servers. Your models run on your infrastructure. Full control, full compliance.

For Indian government agencies bound by data localization requirements and handling some of the most sensitive personal data in the country, on-premise deployment isn't optional. It's the baseline requirement for any serious AI adoption. ACTUALITY understands this, and that alone puts them ahead of a lot of flashier competitors who haven't thought through the government procurement and compliance lens.

6. Sovereign AI — Local LLMs for Government Solutions

If ACTUALITY addresses where the data lives, Sovereign AI addresses something equally important: where the intelligence comes from.

Large Language Models trained on Western internet data don't inherently understand Indian tax law, Hindi administrative procedures, or the nuances of how a CBDT circular differs from a notification. They can approximate. They can't natively operate in our context.

Sovereign AI is building local LLMs designed for government use — models trained on local data, in local languages, for local administrative contexts. Data stays within borders. Models understand the operating environment they're deployed in.

This is the future of public sector AI, and India — with its scale, linguistic diversity, and digital infrastructure ambitions — should be leading this charge. The IndiaAI Mission's focus on building indigenous AI capacity aligns perfectly with what Sovereign AI is demonstrating.

I can tell you: the gap between a generic LLM and one that understands Section 148A of the Income Tax Act 1961 is not a nice-to-have. It's the difference between a tool that helps and one that creates more problems than it solves.

7. FUSKI.ai — Training Your Workforce Before You Deploy Your AI

Here's a truth that doesn't get enough airtime at AI summits: the biggest bottleneck to AI adoption in government isn't technology. It's people.

You can have the most sophisticated AI system in the world, but if the 50,000 officers who are supposed to use it don't understand it, don't trust it, and haven't been trained on it — you've just bought a very expensive piece of software that nobody opens.

FUSKI.ai builds AI-powered training modules for workforce upskilling. Custom learning paths. Adaptive difficulty. Progress tracking. The kind of structured capability building that large organizations need before they can meaningfully adopt AI tools.

When I think about our challenge at CBDT — implementing a new Act across 700+ offices with staff at wildly different levels of digital comfort — this is exactly the gap that needs filling. You can't just send a circular saying "use AI now." You need a systematic, scalable training infrastructure.

FUSKI.ai could be that infrastructure.

The Bigger Picture

Walking the expo floor, what struck me most wasn't any individual product. It was the shift in the overall conversation.

Three years ago, the question at these events was: "Should government use AI?"

Two years ago, it became: "Can government use AI responsibly?"

Yesterday at Bharat Mandapam, the question had evolved to: "How fast can we deploy AI, and what's stopping us?"

That's a seismic shift. And it tells you something about where India — and the Global South more broadly — stands in the AI landscape. We're not spectators in this revolution. We're not waiting for Silicon Valley to build solutions and then adapting them for our context.

We're building. We're deploying. We're setting the terms.

The India AI Impact Summit 2026 — anchored in the three Sutras of People, Planet, and Progress — isn't just a diplomatic gathering. It's a statement of intent. India is positioning itself as a global convenor for responsible, inclusive AI. And based on what I saw on the expo floor, the ecosystem is rising to match that ambition.

The summit continues through February 20th (in fact extended to 21st Feb for general public), with PM Modi's inaugural address tomorrow setting the tone for the main event. I'll be watching closely.

But if the expo is any indication, the future of AI in governance isn't coming.

It's already here. Walking the floor at Bharat Mandapam.