Tax arrears topped a whopping Rs 26.15 trillion as on January 31, 2023 and as much as 94% of these aren’t recoverable, minister of state for finance Pankaj Chaudhary informed the Rajya Sabha on Tuesday.
So far, about Rs 55,070 crore of arrears have been realised. This includes Rs 2,279 crore from indirect tax arrears and Rs 52,791 crore of direct tax dues. The remaining Rs 24.9 trillion are “non-collectable arrears”, the minister said in response to an unstarred question by Rajya Sabha MP Alla Ayodhya Rami Reddy on tax arrears in indirect and direct tax.
Of the total pending arrears, those from indirect tax constitute only a small portion, while direct taxes have the lion’s share (see chart).
The data indicates that the tax authorities still hope to realise about Rs 69,184 crore of the total arrears that have not been classified as ‘non-collectable arrears’. Of this recoverable balance, Rs 14,343 crore pertains to indirect taxes and about Rs 55,000 crore relates to direct taxes.
“The Central Board of Direct Taxes has issued the Annual Central Action Plan for fiscal year 2022-23 (CAP), wherein time bound targets for achievement of key result areas for recovery of arrear demand have been fixed,” Chaudhary said, adding that a multipronged strategy has been formulated to tackle this issue of arrear demand.
The key focus areas of this strategy include reduction of arrear demand by way of statutory actions, cleaning up of demand, efforts for recovery and cash collection out of arrear demand and ‘demand difficult to recover’, early disposal of appeals and monitoring of high arrear demand cases by the CBDT.
“The progress on above action plan is monitored by the CBDT by holding regular meetings and video conferences and through reports,” he further said, adding that various circulars have been issued, addressing all such issues of recovery of arrears including ‘units closed or defaulters not traceable’ for speedy and timely recovery of arrears. These circulars also provide for the mechanism for bringing down the pendency of arrears under appellate authorities like CESTAT and high courts, he said.
Data from the Budget documents reveal that tax revenues raised but not realised declined by 2.3% to Rs 15.8 trillion by March 31, 2022 from Rs 16.2 trillion as on March 31, 2021. However, over the years, the amount has progressively risen. It amounted to a little less than Rs 9 trillion as on March 31, 2018. This includes amounts under dispute as well as amounts not under dispute. “The prominent reasons for tax revenue raised but not realised in amounts not under dispute category are no assets or inadequate assets for recovery, assessee not traceable,” the Budget document said.
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6.08 million individuals in 30% bracket
There were over 6.08 million individual taxpayers in the highest income tax slab of 30% in Assessment Year 2022-23, minister of state for finance Pankaj Chaudhary said in response to a question in the Rajya Sabha. This is a 25.6% jump from AY2021-22, when 4.84 million individual taxpayers fell in the 30% tax slab.
Despite widening the tax base in recent years, the number of income taxpayers in the country is about 83 million, which is roughly 6.25% of the population. Individual taxpayers fall in the 30% tax slab if their annual aggregate income is more than Rs 10 lakh and have opted for the old tax regime, or their annual aggregate income is over Rs 15 lakh and they have opted for the new tax regime.