Mumbai: Incme Tax refunds will now be credited electronically through RBI's electronic clearing system (ECS).

The RBI in a circular issued to chiefs of banks said, "The Government has since taken a decision to implement ECS credit for direct tax refunds. The Government will issue a notification in this regard shortly.

Banks should waive ECS charges in respect of Income Tax Refund Orders (ITROs) as and when the ECS mode is adopted by Government for refund of taxes.''

Currently, paper-based ITROs are being issued by Income Tax Department for refund of income-tax to assesses. The banks are then required to handle ITROs and credit the refunds to their constituents' accounts. Currently income-tax refunds are handled nationalised banks led by State Bank of India. "The above procedure involves, elaborate manual handling of these instruments at banks' branches.