Taxman is unable to catch the millions avoiding taxes
Nothing exposes the extent of tax evasion in the country than the fact that there were just 6 individual taxpayers in assessment year 2012-13 who declared a salary income of over R50 crore and just 18,358 that declared a salary income of over R1 crore—projections based on PRICE’s all-India survey, for 2014-15, however, showed that there would be at least 300,000 persons who would have a salary income of more than R1 crore. While researchers will find many such gems in the direct tax data that the tax department has just put in the public domain, the taxman will do well to do his own analysis. So while direct taxes rose 12% per annum on an average between FY12 and FY16—within this, corporate taxes grew 11% and personal income taxes 13.8%—it is important to note that the taxman’s contribution to this has not been as large as one would imagine. The fact that just 13.3 lakh persons declared a total income—including business and other income as well—of over R10 lakh in AY2012-13 tells its own tale since, as the government had pointed out earlier, 16 lakh persons made credit card payments of more than R2 lakh in FY13 and 52.4 lakh persons spent more than R2 lakh buying mutual funds that year. Yet, more than 85% of the taxes collected come from TDS, advance taxes and self-assessment taxes that people declare on their own. Just 7% comes from the additions made to people’s incomes by the taxman during the assessment (regular assessment tax).
The regular assessment tax component also includes collection of arrears. This is especially problematic since the sharp build-up in tax arrears—from R2.49 lakh crore in FY12 to R8.28 lakh crore in FY15—has been associated with ‘tax terror’. As compared to this, the collection of arrears has gone up from R10,016 crore in FY09 to just R36,593 crore in FY15 and an internal booklet of the tax department acknowledges that over 80% of the R8.28 lakh crore is difficult to collect. More data mining by the taxman, critical to raise the level of taxes, would also reveal that of the 2 crore assessees from whom taxes are due—this data is contained in the report circulated at the last annual conference of the taxman—nearly two-thirds owed just R1,204 on average—writing this off would give great relief to the assessees and allow the taxman to concentrate on the 38,981 assessees who owe nearly 90% of the tax due. The tax department has put out a lot of data, but finding the treasure requires the taxman to make some effort.