Income Tax Returns Surge by 80% with Direct Tax-GDP Ratio 5.98%

Be it an after-effect of GST, demonetization or the stringent norms laid down by the government of India, the number of income tax returns have bolstered up by 80% annually to 6.85 crores in FY 2017-18. Direct Tax- GDP ratio of 5.98% in FY 2017-18.

The statistics have further revealed that the number of taxpayers has increased from 5.27 crore in AY 2013-14 to 7.41 crore in AY 2017-18. If we look into it deeply, the personal income tax collection as a share of GDP has increased from 2.09 in FY 2016 to 2.43 in 2017, the year when the bank notes were demonetized.

Salaried taxpayers have increased by 37% from 1.7 crores in FY 2013-14 to 2.33 crores in FY 2016-17 and the average income declared by such taxpayers have increased by 19% during the same period.

Income Tax Returns vs. Average Tax per Payer

Though the e-returns filed by the individual taxpayers have grown up high as shown in the statistics, but the real challenge is the average income tax collections paid by the tax-payer has come down by 30.2% to Rs 27,083.

In the previous two years, the returns filed has increased steadily, the average tax paid has declined sublimely from Rs 44,000 to Rs 40,200. This may be majorly due to income tax rate cut to 5% wherein average tax of 12500 (for taxable income above INR 5 lakhs) is saved by taxpayers.

This indicates that though the average income tax collections has not increased but more tax payers have come under the ambit of the Income Tax Department, and this won’t contribute much to the improvement in the GDP ratio.

However, the experts feel that the government should investigate the reasons behind the downfall of the income tax collections. Another reason cited is the full picture of the year could be different from the monthly version because there may be some new filers who have made disclosures as per the government norms (GST) for the very first time but have not disclosed their real income.

Experts are of opinion that though the ticket size is low in the short-term but bringing more assessee under the system would likely to yield better returns in the coming year.

In the end, we would like to conclude that spurt in number of income tax returns and taxpayers is definitely a good sign of growth and expansion of tax base.