The grant will help finance data outsourcing from the income-tax department. The Kelkar report on direct taxes as well as the Shome committee on tax administration and policy had recommended a greater degree of computerisation in tax departments.

Senior officials of the income-tax department discussed the issue last week with officials of UTI Investor Services, which will develop a nationwide network to receive tax return data from the department.

The company will also develop the tax information network on a build operate and transfer basis. Income-tax officials are expected to work with UTI Investor Services initially to familiarise them with the way tax returns are handled.

The department will also have to devise ways to transfer data without compromising on secrecy.

However, the department may have to rework the Saral returns, reintroduced in 2002-03, as well as rethink on whether it will be able to continue the bulk filing of returns for corporates introduced last year.

Since 1995, the finance ministry has been able to sanction only about Rs 50 crore (Rs 500 million) to upgrade the computer network for the direct and indirect tax departments.

Apart from financing the project, the Manila-based institution is expected to provide technical consultancy to the revenue department.

The tax information network is expected to be ready by 2005. It will serve as a reservoir of information on tax payments and refunds.

However, for the time being, the income-tax department has dropped a proposal to involve banks in refunds since the Reserve Bank of India has expressed its inability to reconcile the alpha-numeric permanent account number system with its numeric-based system of cheque clearance in banks.

The income-tax department handles about 45 million cases every year. Because of the huge load, officials are often unable to analyse cases of tax evasion or even take up promising leads.