Even as the country’s total taxpayer base increased to 6.41 crore in assessment year (AY) 2016-17 from 4.38 crore in AY 2011-12 — a rise of over 46 per cent over five years — this surge has almost entirely been on account of individual taxpayers. Over these five years, the addition in individual taxpayers numbers was higher than the average trendline — up by about 48 per cent.
While the total taxpayer base grew at an average rate of about 7.9 per cent a year, individual taxpayers recorded an average annual growth rate of 8.2 per cent in these five years, inching up from 94 per cent in AY 2011-12 to 94.9 per cent in AY 2016-17, according to official data.
The term individual taxpayers include individuals who earn income through salary or through means such as interest, pension, who earn income from one housing property and individuals or Hindu Undivided Families (HUFs) with income from profits and gains of business or profession.
The surge in the numbers is, in part, attributable to the tax department’s focus on increasing compliance on the direct tax front, especially after demonetisation. It was reflected in an over twofold increase in searches to 1,152 by the tax department in 2016-17. The number of searches in 2016-17 was higher even than the combined number of searches in the previous two financial years (545 in 2014-15 and 447 in 2015-16). The total value of assets seized during these searches in 2016-17 stood at Rs 1,469 crore, as against Rs 712 crore in 2015-16 and Rs 762 crore in 2014-15.
During the first eight months of 2017-18 fiscal, the number of searches by the tax department stood at 360 (April-November). Searches during 2017-18 led to admission of undisclosed income of over Rs 10,100 crore. Also, over 3,100 surveys were conducted (till October) during 2017-18, leading to detection of undisclosed income of over Rs 2,400 crore.
Even within the class of individual taxpayers, there is a skew in the tax payout trend, as pointed out by Union Finance Minister Arun Jaitley in his Budget speech of 2018-19. He had said that as against the general perception that individual business persons have better income as compared to salaried class, the major portion of personal income-tax collection comes from the salaried class.
For assessment year 2016-17, 1.89 crore salaried individuals who filed their returns had paid a total tax of Rs 1.44 lakh crores, which worked out to an average tax payment of Rs 76,306 per individual salaried taxpayer. As against this, 1.88 crore individual business taxpayers including professionals, who filed their returns for the same assessment year, paid total tax of Rs 48,000 crore, which works out to an average tax payment of Rs 25,753 per individual business taxpayer.
Incidentally, the total number of individual taxpayers as on September 30, 2017, at 6.08 crore, constituted only 4.86 per cent of India’s total population of 125 crore. The Standing Committee on Finance, in its report in March 2018, had flagged the low number of individual taxpayers vis-à-vis the country’s total population and said that it “clearly demonstrated the “regressive nature of our direct tax regime” and “the narrow base the (Revenue) Department operates on”.
The House panel had suggested that the Revenue Department “review and reorient” its strategies with appropriate tax policy so that there is a broader as well as a deeper tax-base vis-à-vis other comparable and emerging economies.
“For this, the government needs to eliminate distortions and inequities embedded in the present system which should also be seen to be fair and just. The long-awaited Direct Taxes Code should squarely address this issue at the policy level while simplifying/rationalising the process and procedures. The tax slabs/rates in respect of GST may also be rationalised with a view to broadening the tax base and increasing tax compliance so that the objectives of the tax reform can be fully achieved,” the Committee had said.
The government had last year constituted a high-level task force headed by CBDT member Arbind Modi to review the Income-tax Act and draft a new direct tax law. The panel is supposed submit its report to the government by next month.
Direct taxes constitute about 50 per cent of the total tax collections of the country. The share of direct taxes in the total tax collections in the last six years has declined from 55.82 per cent in assessment year 2011-12 to 51.03 per cent in AY 2016-17. Correspondingly, the share of indirect taxes in the total tax collections has increased from 43.52 per cent in AY 2011-12 to 48.95 per cent in AY 2016-17.
Direct tax collections have grown over 57 per cent during last five years, crossing the Rs 10 lakh crore mark in the financial year ended March 31. Total direct tax collections stood at Rs 6.39 lakh crore in financial year 2013-14, rising to Rs 6.95 lakh crore in 2014-15, 7.42 lakh crore in 2015-16, 8.5 lakh crore in 2016-17 and Rs 10.02 lakh crore in 2017-18, as per latest official figures.