The notion is that India’s tax data hardly match the ostentatious consumption being witnessed in several pockets of the country, especially the urban centres. However, Indians may not be such compulsive spenders, after all.
In the four years between FY14 and FY17, the number of cars sold in the country annually increased by 5.4 lakh or 22%. While this may not be a very impressive figure even at first glance, the growth in car sales would indeed look below par when juxtaposed with the number of individuals who during the period have entered the income bracket where one could assume that owning a car without getting into debt trap is possible. In FY17, 62.2 lakh individuals in the country reported gross annual income of `10 lakh or above, up 37.4 lakh or 150% from FY14.
Of course, the rise in tax compliance in recent years — the number of individuals/entities who have filed tax returns in India grew from 3.8 crore in FY14 to 6.9 crore in FY18 and is poised to be 7.6 crore or thereabouts in the current fiscal — may have contributed to the big jump in the number of people reporting gross income of `10 lakh or above. But whether inside or outside this tax bracket, these people could have been expected to consider buying a car and if a sizeable section of them is not doing so, they could well be wary spenders. To put it differently, despite seeing their income grow at somewhat fast clip, large sections of taxpayers are not confident of sustaining their income levels and may have turned thrifty.
Car manufacturers, however, don’t agree with the idea of car sales being below potential. “While it makes sense to connect income growth with car sales, it’s not prudent to do the same for income declared to the tax department with that of car sales. It’s plausible that more people may be declaring income now compared to earlier but that will have limited bearing on car sales growth,” Sugato Sen, deputy director-general, Society of Indian Automobile Manufacturers (SIAM), said.
The trend of growing number of income tax filers and surge in wealth is visible in tax statistics. Earnings (gross income) reported by Indian taxpayers rose 67% to `44.9 lakh crore between FY14 and FY17 (much higher than the nominal GDP growth of 36% during the period), the government said recently, seeking to prove that demonetisation and other steps taken by it to curb blackmoney has not only led to an expanded tax base, but also more honest reporting of income.
“The total number of taxpayers (including corporates, firms, HUFs, etc) showing (gross) income of above `1 crore has also registered a sharp increase. While 88,649 taxpayers disclosed income above Rs 1 crore in assessment year (AY) 2014-15 (FY14), the figure was 1,40,139 for AY2017-18 (FY17), a growth of about 60%. Similarly, the number of individual taxpayers disclosing income above Rs 1 crore increased during the period under reference to 81,344, from 48,416, which translates into a growth of 68%,” the Central Board of Direct Taxes has said recently.