A man holds a Rs 2000 banknote | Dhiraj Singh/Bloomberg
A man holds a Rs 2000 banknote (representational image) | Dhiraj Singh/Bloomberg
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The sharp increase in tax filers in the lower income slabs can be mainly attributed to government’s decision to start penalising late filers.

New Delhi: Taxpayer compliance has risen sharply in India in the April-to-December period of the 2018-19 fiscal but much more among taxpayers belonging to lower-income groups.

E-filing data available with the Income Tax department till December 2018 shows that compliance has sharply increased among taxpayers reporting an income of up to Rs 10 lakh.

A 45 per cent increase has been reported in the number of taxpayers filing tax returns online in the income category of Rs 0 to Rs 10 lakh compared to the corresponding year-ago period.

Infographic: Arindam Mukherjee/ThePrint

While this increase is 44 per cent for taxpayers declaring an income of up to Rs 5 lakh, it is more than 49 per cent for taxpayers declaring an income between Rs 5 lakh and Rs 10 lakh.

The growth in the corresponding taxpayer base was 16 per cent and 24 per cent respectively in the same period in 2017-18.

In comparison, the growth in taxpayers in the higher income categories has been relatively less.

The Rs 10 lakh-20 lakh income category, in 2018-19, has seen a rise of 34 per cent while the Rs 20 lakh-50 lakh category has seen a 37 per cent rise.

Data available with the tax department further shows that the growth in the number of taxpayers filing returns under higher income tax slabs — more than Rs 50 lakh — has been less than 35 per cent.

Also read: Indian tax revenues fail to meet targets five months in a row, raise doubts on borrowing plan


The sharp increase in tax filers in the lower income slabs can be mainly attributed to the government’s decision to start penalising late filers.

Last year, the government introduced a budget provision that introduced penalties of up to Rs 10,000 for late filing of income tax returns.

According to the new rules, a penalty of Rs 5,000 will be levied if the return is filed after the due date but before 31 December. After 31 December, the penalty will be Rs 10,000.

However, if the taxpayer’s income is less than Rs 5 lakh, maximum penalty levied is capped at Rs 1,000.

It remains to be seen how much the taxpayer base has actually increased as the e-filing growth till December could be attributed to taxpayers filing timely returns to avoid penalties.

“Earlier, many taxpayers in the lower income category did not file their tax returns as their tax was deducted beforehand by their employers through TDS,” said B.M. Singh, former chairman of the Central Board of Direct Taxes. “They filed returns only to claim refunds. But now with the penalty imposition, even they are being forced to file their returns.”

Singh said that an increase in the tax returns filed will not necessarily translate into higher tax collections as these taxpayers many have been filing taxes in the earlier years also.

Also read: Middle of Nowhere Class: When just 2.56% pay 100% of India’s income tax & govt wants more

Tax base

Finance Minister Arun Jaitley is aiming for 7.6 crore tax returns to be filed this year as against 6.86 crore filed last year. As of 31 December 2018, more than 6.24 crore returns were filed online.

The government is banking on formalisation of the economy after the implementation of the Goods and Services Tax and demonetisation as well as steps taken to crack down on black money to expand the taxpayer base in India.

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  1. govt has not implemented GSTR2, which is crucial to GST if you want to stop tax evasion. Since it hasnt implemented, several fly by night fictitious companies come up for a few months to certify GST supply and then disappear.


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