Growth in personal income tax (PIT) collections may slow a bit in the second half of the current financial year from the impressive 31% seen in the first, as the income tax ((I-T) department aims to make tax refunds to the tune of Rs 2 trillion in the remainder of the year, an official source told FE. “The second-half refunds are likely to be higher than in the year-ago period by around Rs 50,000 crore. This would mean that the refunds in the whole of FY24 would be above Rs 3.5 trillion, as against a little over Rs 3 trillion last year,” the source added.
The higher refunds would bring down the growth in gross PIT collections (receipts after refunds but before the mandatory transfers to the states) for FY24 to 17-18%, still significantly higher than the Budget Estimate (BE) of 11.4%. This would mean that the PIT mop-up in the year would be in the vicinity of Rs 9.5 trillion, against the BE of Rs 9.01 trillion.
In April-September this year, PIT collections after refunds stood at Rs 4.52 trillion, accounting for about 50% of the BE FY24. During the first half of last fiscal year, 43% of the annual target was met.
As of October 9 this fiscal, refunds amounting to Rs 1.5 trillion have been issued, as against Rs 1.53 trillion issued in the corresponding period last year. This signals a moderation in the pace of refunds so far in the current year.
In recent years, the department has put the refund process on the fast track, as part of its efforts to boost taxpayer confidence (see chart).
The higher-the-budgeted growth in PIT collections so far in the current year are also the result of several administrative measures undertaken by the department to ensure better tax compliance and detect and curb tax evasion. Of course, buoyancy in economic activities, particularly in the services sectors also impacted the tax mop-up positively.
In a recent statement, the finance ministry has said that during the peak filing days this year, the e-filing portal successfully handled the traffic providing a seamless experience to the taxpayers and tax professionals. This, it added, eventually led to record ITR filing– number of ITRs filed in FY24 till October 31 stood at 78.5 million, as compared to a total of 77.8 million ITRs filed in the whole of FY23.
“Support from the help-desk was provided to taxpayers through inbound calls, outbound calls, live chats, Webex and co-browsing sessions. The helpdesk team also supported resolution of queries received on the Twitter handle of the Department through Online Response Management (ORM), by proactively reaching out to the taxpayers/stakeholders and assisting them for different issues on a near real-time basis,” the finance ministry had said.
On the other hand, to curb tax evasion, the department through the use of technology has been able to identify the taxpayers who have evaded paying taxes.
According to a ministry official, in the past few years I-T department has been using data analytics to assess the profile of taxpayers in order to match their income declaration and transactions that they incur. In cases where mismatch is found, the tax authorities send alerts, issue notices and raise tax demands.
“For the past 4-5 years, the department has been using data analytics to do profiling of taxpayers…which has helped us to identify several tax evaders,” the official said.
Last month, FE had reported that individuals with reported or likely annual income above Rs 1 crore are being subjected to “360-degree profiling,” The department is tracking these individuals’ investment profiles, expenses incurred and sources of income for assessment.
Maneet Pal Singh, Partner, I.P. Pasricha & Co said, “In recent years, data analytics, artificial ikntelligence and machine learning have emerged as game-changers for tax enforcement. These technologies empower tax authorities to efficiently detect tax evasion by analysing vast datasets, uncovering patterns, and identifying irregularities. As a result, not only tax compliance has improved but it has also encouraged timely tax compliance.”