In his budget speech, finance minster Arun Jaitley highlighted that the country’s direct tax collection is not commensurate with the income and consumption pattern of the country’s economy. Citing data from returns filed in assessment year 2016-17, he said that of the 76 lakh individual assesses who declared income above Rs 5 lakh, 56 lakh are in the salaried class. He underlined that we are largely a tax non-compliant society and the predominance of cash in the economy makes it possible for people to evade taxes.
Publicly available data for assessment year 2014-15 show individuals account for 93% of the total 3.65 crore returns filed and 43% of the total personal income tax paid. Of the 3.65 crore returns filed, 75%are from individuals with income below Rs 5 lakh.
This income bracket paid 42.5% of the taxes in the individual category. This missing middle—income bracket Rs 10 to Rs 25 lakh—accounted for only 5.5% of the returns filed and 12.4% of the personal income tax paid. Individuals with income above Rs 50 lakh paid 26.5% of the total personal income tax paid. The Budget 2017 clearly missed another chance to make tax rates more reasonable and expand the tax base.