tax refund
A very surprising case has come to light for the people and organizations waiting for tax refund. A new rule for validating bank account to get tax refund has been implemented from financial year 2026. This entire process has been linked to a new real-time verification system of National Payments Corporation of India (NPCI). But, there is a technical glitch stuck in this new system right from the beginning, due to which tax refund worth crores of rupees has got stuck. The reason is not a big mistake, but simply the name registered in the bank account being too long. Actually, banks’ systems allow up to 100 characters in the account name, whereas NPCI’s new system is supporting only 50 characters.
Technical glitch stuck between systems
This entire hurdle has arisen due to the mismatch of two different technical parameters. On one hand, banks allow their customers to use up to 100 characters in the official name of the account, on the other hand, NPCI’s verification system for approving refunds stops at 50 characters only. When the system matches the bank account names, a ‘mismatch’ error appears due to different lengths of the names. Due to this simple technical glitch, account validation is not being completed.
Impact on foreign investors
Large foreign portfolio investors (FPIs) are having to bear the biggest brunt of this new system. At present, there are at least 10 percent of FPIs whose official name is longer than 50 characters. Due to the account validation process not being completed, the refund process of these institutions has completely stopped. According to the information, refund worth several crores of rupees of each affected investor is stuck due to this technical hitch. According to the new rules, the tax department cannot transfer the refund money until the bank account is successfully validated.
Why are names so long?
Generally a common man’s name is quite short, but there is a specific legal and institutional way of naming foreign funds and pension funds. In their official name, first the name of the main fund is added, after that the name of the fund manager is added and finally the structure of the organization (eg Sicav, LLP) is written. Because of this long format, his name easily crosses the limit of 50 characters. When these foreign investors enter the first 50 characters of their name in the NPCI system, it does not match with the full name available in the bank.
Expecting relief from Finance Ministry
In view of this serious technical problem, now NPCI in collaboration with the custodian banks has directly approached the Finance Ministry. A special proposal has been placed before the Ministry, in which a demand has been made to give special exemption to foreign portfolio investors from this rule of bank account validation. At present everyone is waiting for the government’s intervention. It is expected that in order to facilitate foreign investment, the government will soon decide on an exception in this matter, so that the stuck refund of crores can be cleared.
