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ITR numbers up 25% this year, but bulk of it is small tax payers

In August, the Central Board of Direct Taxes (CBDT) had said that there was a 25 per cent increase in the number of ITRs filed between April 1 and August 5.

Written by Khushboo Narayan | Mumbai | Updated: September 3, 2017 10:37 am
jan dhan accounts, jan dhan, PMJDY, demonetisation jan dhan accounts, jan dhan deposits, jan dhan value, india news, business news In August, the Central Board of Direct Taxes (CBDT) had said that there was a 25 per cent increase in the number of ITRs filed between April 1 and August 5. (Representational)

While the Centre had attributed the 25% increase in the number of Income Tax Returns (ITRs) filed this year to the success of demonetisation and its ‘Operation Clean Money’, data released recently by the Income Tax department shows that individuals, companies and other entities with income of Rs 5 lakh and below accounted for 69.42 per cent of the total increase.

This implies that while compliance may have improved, since the bulk of the new tax payers are those with annual income of Rs 5 lakh and below, it will hardly boost personal tax collections in the near term. That’s because the tax liability of this category of new tax payers is limited given their relatively low income threshold — with the first tax slab of 10 per cent kicking in only after Rs 2.5 lakh – and with tax saving options on offer.

“This means that the majority of the new taxpayers who have filed the tax returns would be contributing almost nothing to the tax revenues. The tax department will have to aggressively pursue the rest of the taxpayers to pursue the trail left behind after the demonetised currency was deposited back,” said Amit Maheshwari of Ashok Maheshwary & Associates LLP.

The 2016-17 Economic Survey too had said that “while ITR numbers up 25% this year, but bulk of it small tax payers the tax base did expand after demonetisation… the average income reported of the new taxpayers — Rs 2.7 lakh – was not far above the tax threshold of Rs 2.5 lakh and, as a result, the immediate impact on tax collections was muted. The full effect on collections will materialise gradually as reported income of these taxpayers grows,” the survey had said.

In August, the Central Board of Direct Taxes (CBDT) had said that there was a 25 per cent increase in the number of ITRs filed between April 1 and August 5. According to a statement by the tax department, the number of returns filed as on August 5 stood at 2.83 crore as against 2.27 crore filed during the corresponding period of 2016-2017, registering an increase of 24.7 per cent compared to the growth rate of 9.9 per cent in the previous year. The increase in total returns between April and August 2015-16, and the corresponding period in 2016-17 is 55.95 lakh. Of this, the returns filed by the below Rs 5 lakh category was 38.84 lakh, or 69.42 per cent of all returns filed.

According to the tax data, of the 2.83 crore returns filed between April 1 and August 5, 2.03 crore returns are from individuals, companies and entities which have income of Rs 5 lakh or below. Apart from this, only 76.49 lakh individual assessees have filed tax returns declaring income above Rs 5 lakh between April 1 and August 5 .

The government’s direct tax collections grew 19.2% in April-July, the first four months of this fiscal to Rs 1.90 lakh crore. According to CBDT, direct taxes collected during these four months account for 19.5% of the total budget estimate of direct taxes for fiscal 2017-18.

In February, Union Finance Minister Arun Jaitley during his Budget speech had said that the direct tax collection in India is not commensurate with spending. Explaining the need for widening the tax net, he had said that only 76 lakh individual assessees had declared income of above Rs 5 lakh and at least 56 lakh such assessees are in the salaried class. “India is a largely tax non-compliant society thanks to the presence of large cash economy which allows tax evasion,” the FM said.

According to tax data, only 45,430 individual assesses have filed e-returns between April 1 and August 5, declaring an income of over Rs 1 crore. The data released by the tax department last year also showed that only one per cent of the total Indian population paid tax for assessment year 2012-13 and 5,430 individuals paid more than Rs 1 crore as direct tax.

Last year, economist Thomas Piketty had said that he hoped the Indian elite would pay more taxes on wealth and income, as India’s tax to GDP ratio of less than 11% is insufficient to meet its challenges of inequalities.

A December 2002 report by the Task Force on Direct Taxes headed by Vijay Kelkar had said that one of the biggest challenges for the tax department will be “to bring the missing middle — mainly urban, self-employed service sector professionals who, advertently or unwittingly, have dropped out of the tax base — into compliance, through the right mix of communication, education and enforcement”.

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  1. Ashish Gupta
    Sep 4, 2017 at 12:30 pm
    I didnt study the article in complete detail. Buts its stupif if it doesnt say how much increase of tax revenue is expected. Its stupidly saying almost no increase in collections will take place inspite of tax payers havibg grown by 25 . I stand correcfed if my assumption that this info has not been given is wrong.
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      Ak
      Sep 3, 2017 at 8:52 pm
      I filed my ITR successfully and even got a confirmation that the return is filed. After a month I got a notification from income tax department that I need to pay more tax. What am I supposed to do now pay the amount and file return again from he beginning?
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        Prshanth
        Sep 3, 2017 at 7:37 pm
        Even from my personal experience I see lot of these new returns with very low income. For ex due to tds queries on the e filling portal many senior citizens filled ITR who otherwise wouldn't be required to file the returns, for claiming refunds or just for compliance purposes. In these returns all cases resulted in refunds. Classic cases of increased returns without Inc increase of tax
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          Rahul
          Sep 3, 2017 at 9:33 am
          IE has so much negativity towards bjp and India in general. Lets take another statistic. Actual income tax collections for 2016-17 show an annual increase of 23.3 over 2015-16 actual estimates. Estimated increase in 17-18 over 16-17 is around 25 . How about this ? IE picks and chooses isolated data and applies bias to prove that everything done by bjp is wrong. IE has become disgrace to Goenka name under CPI chamchas like seema chisti.
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            Apratim
            Sep 3, 2017 at 10:02 am
            Isn't your comment showing as well that this advertised 25 percent was no big deal? I do not see any negativity towards India in IE, except for those for whom India means the cheats of RSS and BJP. It is only that this newspaper points out their lies. Of course, in BJP chamcha definition that is anti-national.
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            1. Ashish Gupta
              Sep 4, 2017 at 12:31 pm
              I didnt study the article in complete detail. Buts its stupif if it doesnt say how much increase of tax revenue is expected. Its stupidly saying almost no increase in collections will take place inspite of tax payers havibg grown by 25 . I stand correcfed if my assumption that this info has not been given is wrong.
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              montu Sharma
              Sep 3, 2017 at 10:57 am
              If showing honest reports and data is negative reports then I'm happy unlike bhakts and rss supporters who like ostrich have put there head in sand
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                Pramod
                Sep 3, 2017 at 1:32 pm
                Rahul there are two flaws in your argument- 1. you have mentioned percentages but not actual numbers in crores of rupees or the source of your information, 2. How can there be actual estimates, there can be actual data or estimates.
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              2. H
                Hedonist
                Sep 3, 2017 at 8:54 am
                Big things have small beginnings.
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