Number of Crorepatis Up, But Mixed Bag on Direct Tax Front, New I-T Data Shows


The Wire, October 22, 2018


The income-tax department on Monday released a new set of data that shows an increase in the number of new crorepatis and an increase in the number of income tax returns filed over the last few years, but also other less encouraging factors on the direct tax front.

The data also, in part, provides a picture of tax trends during the Modi government as it gears up for the 2019 general elections. 

According to the income tax return data released, the number of individuals whose income was above Rs 1 crore was 81,344 in the year ended March 2017 — a jump of 20% from 67,783 in 2015-16.

With a total of 4.67 crore taxpayers filing returns last financial year, this means that only 0.002% of India’s individual taxpayers earned over Rs 1 crore in FY’ 2016-17.

On the total number of income tax returns filed, the data show an increase of 80% in the last four financial years: from 3.79 crore in 2013-14 to 6.85 crore in 2017-18.

However, as The Wire and others have reported, larger spurts of growth have been seen in a few UPA-II years. And as other tax experts have pointed out, the recent increase in tax filers has largely come from people who would be classified under low income thresholds; the increase therefore hasn’t lead to proportionately higher tax revenues.

Another trend that pops up in the income-tax department data is the small recovery in the Modi government’s skew towards indirect taxes. India’s reliance on indirect tax revenue, which the country has historically had a problem with, became marginally worse over the last four years.

A heavy-handed GST (goods and services tax) structure and a number of implementation issues indicate that the direct tax collection, as a proportion of total tax revenue, is unlikely to improve further in the next year.

Jump in salaried tax payers  

Besides, a couple of data-points the CBDT is using to show greater tax compliance is the fact that the number of salaried tax payers has increased by 37% to 2.33 crore in the three years ending 2016-17.

The average income declared by these taxpayers increased by 19% to Rs 6.84 lakh during 2016-17. It is unclear, however, how much of this growth can be attributed to the new GST system or demonetisation.

Central Board of Direct Taxes (CBDT) chairman Sushil Chandra attributed the numbers as a result of “putting in a number of legislative, informative and enforcement efforts by the tax department” over the last few years.

However, on two other points, the Modi government has made marginal progress. The first is India’s direct-tax-to-GDP ratio.

In remarks made to the media, Chandra noted that “the ratio of 5.98% in FY 2017-2018 is the best direct tax GDP ratio in last ten years”.

While true, as the table below shows, the Modi government actually moved the needle down from 5.62% in 2013-14 to 5.57% in 2016-17.

A recovery was staged though in 2017-2018, with 5.98% being recorded. However, this statistic is still lower when compared to the direct tax GDP ratio achieved in 2007-08 (6.3%) under the previous UPA regime.

Reference:

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