Data Drive: Making tax rates rational

By: | Updated: October 10, 2015 12:49 AM

While tax collections have more than doubled between FY09 and FY15, the number of taxpayers has hardly grown.

income taxWhile tax collections have more than doubled between FY09 and FY15, the number of taxpayers has hardly grown.

While tax collections have more than doubled between FY09 and FY15, the number of taxpayers has hardly grown. There is a huge potential to expand the taxpayer base as only 3.6 crore people file income tax returns despite over 17 crore having permanent account number (PAN). Linking PAN with Aadhaar is a key tax reform which will help in curbing tax evasion and black money. From this year, the Income-Tax Department has started linking Aadhaar numbers to PAN through e-filing of tax returns. Already 35,23,702 returns are PAN-Aadhaar linked. This needs to be extended further. Moreover, the finance minister has announced in a Facebook post that the government is planning to link PAN with high-value cash transactions to combat black money and rationalise the tax structure.

Besides reduction in corporate tax rate to 25% from 30% over the next four years and introduction of GST, going forward, the government is expected to restructure the personal income tax slabs. With the top tax bracket of 30% kicking in at Rs 10 lakh, many in the middle-income brackets tend to depress their income statements to remain in the lower tax slab. The Direct Taxes Code Bill, 2009 had proposed that 30% tax rate should be for income above Rs 25 lakh and the Standing Committee had proposed it to be for income above Rs 20 lakh.

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