New Delhi: The demonetisation gain of more people filing income tax returns seems to have been short-lived. Data from the Income Tax Department shows that the total number of e-returns filed have contracted for the first time in years.
The number of e-returns filed in 2018-19 contracted marginally, by 1 per cent, data available with the IT department showed. However, analysts said this was significant because 99 per cent of tax returns were filed online in 2017-18, and this could indicate a contraction in the total number of returns filed by taxpayers too.
The number of tax returns filed in 2017-18 had surged after the Narendra Modi government invalidated the old Rs 500 and Rs 1000 notes on 8 November 2016, forcing people to deposit the notes in banks within a month and a half. The tax department had used this cash deposit data to improve taxpayer compliance and go after tax evaders.
Small traders impacted
IT department data shows that 6.68 crore tax returns were filed online in 2018-19, as against 6.74 crore in 2017-18. The total number of tax returns filed online and offline in 2017-18 was around 6.84 crore, as against 5.43 crore in 2016-17.
“In the year after demonetisation, people were forced to file their tax returns as they made cash deposits in their accounts and had to declare their source of income and file their returns. They have no such compulsion in 2018-19,” said B.M. Singh, former chairman of the Central Board of Direct Taxes.
“The fall in the tax returns filed in 2018-19 also shows the impact of demonetisation on small businesses, and the rollout of GST from July 2017. Both these measures have impacted incomes of small traders and businesses, and they are no longer filing their tax returns,” he said.
The fall in the number of taxpayers is also despite the fact that delayed and non-filing of IT returns attracts a penalty from 2018-19. A penalty of Rs 5,000 is levied if the return is filed after the due date but before 31 December. The penalty levied is Rs 10,000 after 31 December. However, if the taxpayer’s income is less than Rs 5 lakh, the penalty is capped at Rs 1,000.
The decrease in compliance is not good news for the government, and comes at a time the income tax department has failed to meet its revised income tax collection target of Rs 12 lakh crore for 2018-19.
IT Department’s response
Responding to questions from ThePrint, an official of the Income Tax Department who did not wish to be identified said: “The data for 2017-18 also includes revised returns for the previous years, whereas for 2018-19, it only includes one year’s revised returns data in 2018-19.
“If we just look at tax returns filed for assessment year 2017-18 and 2018-19, then there is a 19 per cent growth.”
This report has been updated with the Income Tax Department official’s response.