E-filing of income tax returns is likely to increase sharply to 3 million in the current financial year (2007-08), up from around 322,000 in 2006-07.

Non-corporate assessees, whose accounts are audited under Section 44AB of the Income Tax Act, are expected to account for a bulk of these filings, with as many 2.5 million e-returns expected from them this year.

Partnership firms and businesses whose turnover exceeds Rs 40 lakh a year and professionals whose income exceeds Rs 10 lakh a year come under this category, for whom e-returns were made mandatory from this year onwards.

Corporates, for whom e-filing was made mandatory last year, are expected to file around 322,000 e-returns. For both the above categories, the last date for filing returns is October 31, 2007.

Till July 31 this year, around 146,000 e-returns had already been filed by salaried individuals and businessmen for whom e-filing is optional. Only 3,300 assessees had filed e-returns till July 31, 2006.

The rapid increase in e-returns will test the Income Tax Department's preparedness to process such returns. The department has recently set up a National Computer Centre connecting 745 locations in 510 cities and towns across India. Work is in progress to set up a National Data Centre by December this year, official sources said.

"After the new architecture is in place, there will be speedier processing of returns and prompt issue of refunds," the sources added.

Going forward, more individual taxpayers may prefer to file returns online to avoid the hassles of filing returns manually at a designated office, officials said.

Besides faster processing of returns and greater efficiency in collection, the department's technology initiative is expected to enhance capacity to handle the projected workload up to 2010-11.

To make e-filing smooth, the department has also redesigned the tax return forms. Now called the Income Tax Return form series 1 to 8, the forms are annexure-less, except ITR-7.

The total number of income tax returns filed in 2007-08, including e-returns, is expected to be slightly higher than the 35 million in 2006-07.