The government on Tuesday said the number of persons under the tax net has increased by 91 lakh in 2016-17 and attributed this “higher-than-usual” rise to demonetisation and the subsequent crackdown on tax evaders. This, along with undisclosed income of Rs 23,144 crore detected via search and survey actions and a surge in e-filing of tax returns, showed how the note ban was very effective in nailing down tax evaders, it claimed. While the official data was not available about the growth in taxpayer base in recent years, as many as 48 lakh people were brought under the tax net in 2012-13 and 36 lakh in 2011-12. Tax experts say the addition to the taxpayer base in 2016-17 did not amount to big surge as the government claims; this would be evident when the figures for the three years to 2015-16 are revealed.
Although there is an increase in the share of e-returns in total tax filings (it rose to 97.6% in 2016-17 from 85% in 2015-16), the total number of e-filings in fact grew at slower pace in 2016-17 compared to the previous year (see chart). The number of e-returns in 2016-17 stood at 5.28 crore (provisional) as against 4.33 crore in 2015-16. Launching a new website on the so-called ‘Operation Clean Money,’ finance minister Arun Jaitley said the government’s decision on November 8 to demonetise high-denomination currency notes has accelerated the shift towards a digital economy, with the number of assessees going up and tax revenue rising.
This is mainly because of the fear of dealing in illegal cash, instilled after the note ban. Central Board of Direct Taxes chairman Sushil Chandra said 17.92 lakh people were identified for unexplained deposits after the note ban, with the taxmen identifying one lakh suspected tax avoidance cases. “We identified around 17.92 lakh persons in whose case the cash transactions did not appear in line with the taxpayers’ profiles. And online verifications of these transactions are underway,” Chandra said. Of the 17.92 lakh, as many as 9.72 lakh people have so far responded to SMSes and e-mails sent by the I-T department. These people have provided response for 13.33 lakh bank accounts involving cash deposits of around Rs 2.89 lakh crore.
The hardening of crackdown comes amid speculations that the Pradhan Mantri Garib Kalyan Yojana, also known as the Income Disclosure Scheme-II (IDS-II)–the window provided by the government for people to deposit their unaccounted cash after the note ban to come clean after paying a hefty fine–seems to have come a cropper. Although the government hasn’t yet released the collections from the IDS-II, various reports have pegged it in the range of just Rs 2,000-3,000 crore, belying expectations of a massive mop-up through the scheme running into over Rs 1 lakh crore.
Recently, the CBDT, however, said the impact of the government action after the note ban is “already visible” in the 16% growth in gross tax collection in 2016-17 (the highest in the last five years) and the 14% rise in net tax collection (the highest in the last three years). Also, growth in personal income tax was over 18% in 2016-17, while there has been an increase of 25% and 22% in regular assessment tax and self assessment tax, respectively. According to sources, around Rs 13,500 crore or roughly half of the estimated tax proceeds from IDS-I · the window for which was open between June and September 2016 had come in by March 31.
Net of this, personal income tax revenue would have grown some Rs 52,000 crore–or at a much slower pace–in 2016-17 from the previous fiscal. Also, although the rise in personal income tax collection in 2016-17 was much higher than the annual growth levels in years of comparable economic expansions in recent past, the IDS-II imprint was clearly absent in the tax data released by the finance ministry earlier this month.