Even as the number of e-returns filed by individual taxpayers increased to Rs 5.40 crore in the April-August period of the current financial year, which is an increase of 70 percent annually, the average tax paid declined by 32 percent to Rs 27,083, reports The Financial Express.
In FY18 and FY17, while the growth in the same period was 24 percent and 39 percent, respectively, the average tax paid declined marginally from Rs 44,000 to Rs 40,200.
Demonetisation and Goods and Service Tax (GST) expanded the tax base, but personal income tax (PIT) collection hasn't gone up.
The number of individual taxpayers has been growing every year and it rose to Rs 7.8 crore in FY17 from Rs 5.9 crore in FY16 and it is estimated that in FY18 the figure could be around Rs 10 crore. Interestingly, PIT revenue growth, which climbed from 8.5 percent in FY16 to 29 percent in FY17 nosedived to 19 percent in FY18.
This phenomenon highlights the fact that though the number of individual taxpayers has increased, the average tax paid by them has come down.
The government is expecting that the e-filings should touch a figure of Rs 7.6 crore in the current financial year compared to Rs 6.9 crore in the previous one. In FY14, 3.8 crore e-turns were filed.
Government is banking on healthy direct tax collections to cover for the Rs 1 lakh crore shortfall in GST collections in 2018-19.
Experts say many people who made disclosures under GST could have reluctantly filed their returns for the first time and could be hiding their real incomes. Even if the PIT collection is low in the short term, over a period of time, it will yield results as more people join the system.
PIT collections as share of GDP went up from 2.09 percent in FY16 to 2.43 percent in FY17, the year when demonetisation happened. It increased to 2.63 percent in FY18.
Despite more people paying taxes in FY18 compared to FY17, PIT revenue growth was 19 percent compared to 29 percent in the latter.
The reason for this was slowing down of GDP growth in FY18 and large number of new assesses didn't show taxable incomes.
The spurt in tax collections in FY17 was attributed to people who deposited large amounts of cash in banks after demonetisation and disclosed their incomes under the voluntary disclosure schemes.