A quick analysis of the data available from the Income Tax Return Statistics Assessment Year 2018-19 Version 1.1 October 2019 (https://www.incometaxindia.gov.in/Documents/Direct%20Tax%20Data/IT-Return-Statistics-Assessment-Year-2018-19.pdf) offers the following two findings.
a. Of the 5,87,13,458 income tax returns filed for the assessment year 2018-19 a majority i.e., 3,66,62,530 or 62.44 per cent had income of less than 5 lakhs and did not yield any income tax revenue to the government.
b. Of the Gross total income of Rs. 51,33,084 crores declared as income in the income tax returns filed for the assessment year 2018-19- Rs. 11, 44,466 crores or 22.29 per cent had incomes of less than 5 lakhs which did not yield any income tax revenue to the government.
There is a strong possibility if the
number of government (Central, State and Local bodies) and public sector (Central, State and Autonomous) and other government funded bodies is excluded, the number of personal income tax payers would be negligible.
Clearly the Tax Information Net and other tax reporting systems are not bringing in additional assesses in the tax net.
Let us adopt an imaginary scenario where the government decides that assesses with incomes less than 5 lakhs do not have to file income tax returns. Then the government has to provide tax officials and tax filing infrastructure for 62.44 percent less assesses, this may be worth considering. It may also have some political returns.
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