This is time for a mini celebration of sorts. India should actually be proud of taking a definitive step towards evolving as a tax compliant society. Finance ministry data released on Monday clearly demonstrates that about 5.6 million or 56 lakh more people have paid taxes and filed income tax returns in their bid to bring about a semblance of transparency in their personal dealings.
A whopping 2.83 crore returns were received by income tax department for 2016-17 by August 5, the last date for filing tax returns. This mark a huge 24.7 per cent growth in number of tax returns as against 2.27 crore people that filed their returns in the previous financial year.
Well, will the numbers alone tell the story? They may just be an indicator and the actual pudding lies in the final revenue figures to be revealed by the government when finance minister Arun Jaitley presents the budget for 2018-19.
If one were to go by the trends, the exponential increase in number of people paying taxes and filing returns may go up big time this fiscal also. First four months data conclusively reflect the huge spike in advance personal income tax payment that registered a phenomenal growth of 41.79 per cent. The celebration would not have been if the growth was reported in corporate income tax mop up given that refunds from this segment were huge. Both volumes and value growth in personal income tax till August 5 during this fiscal is no doubt a healthy development. A steep rise of 34.5 per cent in the number of people making self assessment of their income tax and filing returns online is yet another indicator in moving towards a tax compliant society.
The huge growth in income tax returns can definitely be attributed to government’s campaign against black money, operation clean money and the impact of demonetising high value currency on November 8 last year. Irrespective of the currency that got extinguished or went out of circulation following demonetisation, the very fact that more people are reporting their incomes, liabilities and paying taxes truthfully is a bright spot in our public life. Reports suggested that over Rs 300,000 lakh crore worth old currency in Rs 1,000 and Rs 500 bills got extinguished. Unless the finance ministry and RBI data comes up with empirical data, final word cannot be said on impact of demonetisation for which Narendra Modi government has taken full credit.
Pruning tax evasion and expanding the income tax base non-intrusively should be the way forward. A huge mine of data compiled as part of demonetisation and campaign against black money should be put to full use by taxation authorities during next two years. One cannot gloat over 2.83 crore tax returns and sit pretty, much more needs to be done. A back of the envelope spending pattern compiled by Financial Chronicle shows that the potential for tax mop up was much more than what has been achieved thus far.
For instance, over three million automobiles were rolled out of the showrooms last financial year. Similarly, over five crore flats and houses across segments, cities and towns were built and put on sale in 2016-17 alone. When over 25 million Indians can afford a globetrotting holiday annually, is it not clear that more people can pay taxes and live more honourably? If over 3.23 crore people were registered investors in stocks at BSE alone, should it not translate to more revenues to finance the government’s development expenses?
Well, these may, perhaps, be uncomfortable questions that have no easy answers. Unless tax payment was made easy, simple and hassle free, non-intrusive, not many will come forward to do their bit. Similarly, Jaitley will have to resist the temptation of resorting to prohibitive taxation if more were to join the main stream and pay taxes. For this to happen, there’s a fit case to bring down tax incidence, increase volumes and value of revenue collection.