80% rise in returns filed, 67% increase in gross income reported, but lower growth in tax mop-up
Earnings (gross income) reported by Indian taxpayers rose 67% to Rs 44.9 lakh crore between FY14 and FY17 (much higher than the nominal GDP growth of 36% during the period), the government said on Monday, seeking to prove that demonetisation and other steps taken by it to curb black money has not only yielded an expanded tax base, but more honest reporting of income.
“The total number of taxpayers (including corporates, firms, HUFs, etc) showing (gross) income of above Rs 1 crore has also registered a sharp increase over the three-year horizon. While 88,649 taxpayers disclosed income above Rs 1 crore in AY2014-15 (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 said.
According to time-series data as updated up to FY18 and income-distribution data for assessment years 2016-17 and 2017-18, direct tax-GDP ratio stood at 5.98% in FY18, the highest in the last 10 years. Although these are above the recent trend, there is clearly a large distance to be covered when it comes to achieving greater tax compliance by the newly added assessess. An over 80% growth in the number of returns filed from 3.79 crore in FY14 (base year) to 6.85 crore in FY18 is yet to fully reflect in tax collections.
As reported by FE earlier, e-returns filed by individual taxpayers grew 70% annually to 5.4 crore in the April-August period of the current financial year, but the average tax paid by them has come down by 32% to Rs 27,083. In the previous two years (FY18 and FY17), while the growth rate for e-filers for the respective April-August periods were 24% and 39%, respectively, the average tax paid had declined marginally from about Rs 44,000 to nearly Rs 40,200.
Also, while the number of salaried taxpayers has increased from 1.7 crore for AY 2014-15 to 2.33 crore for AY 2017-18, up 37%, the average income declared by them has gone up by 19% from Rs 5.76 lakh to Rs 6.84 lakh. Separately, the time series data FY01-FY17 released earlier confirmed a higher (likely short-term) growth in personal income tax (PIT) collections, due to the demonetisation.
PIT collections grew 21.42% in FY17 compared with 8.22% in the previous year. However, the growth in PIT mop-up in FY17 won’t look exceptional when compared with the rates of 20% (FY14) and 18.6% (FY13). Only two individuals in the country reported an annual salary income above Rs 100 crore in FY17 (as against 5 in the previous year), 23 others had such income in the Rs 50-100 crore range and 88 persons earned Rs 25-50 crore from salary. In comparison, while 2 persons reported annual salary income above Rs 500 crore in FY14, 10 had such income in the Rs 50-100 crore range and 32 in the 25-25 crore range.