Tabling the Union Budget 2017-18 in the Parliament today, Finance Minister Arun Jaitley presented the tax collection data to prove that “we are largely a tax non-compliant society.”
Speaking during Budget presentation, Jaitley said, “India’s tax to GDP ratio is very low, and the proportion of direct tax to indirect tax is not optimal from the view point of social justice. I place before you certain data to indicate that our direct tax collection is not commensurate with the income and consumption pattern of Indian economy.”
To make his point, the Finance Minister presented data before the Lok Sabha and said that only 7781 companies in India have shown profit before tax of more than Rs 10 crore.
“As against 5.6 crore informal sector individual enterprises and firms doing small business in India, the number of returns filed by this category are only 1.81 crore. Out of the 13.94 lakh companies registered in India upto 31st March, 2014, 5.97 lakh companies have filed their returns for Assessment Year 2016-17. Of the 5.97 lakh companies which have filed their returns for Assessment Year 2016-17 so far, as many as 2.76 lakh companies have shown losses or zero income. 2.85 lakh companies have shown profit before tax of less than Rs 1 crore. 28,667 companies have shown profit between Rs 1 crore to Rs 10 crore, and only 7781 companies have profit before tax of more than Rs 10 crores.”
In terms of individuals, Jaitley said that number of people in the entire country with an annual income above Rs 50 lakh is only 1.72 lakh while only 24 lakh people show income above Rs 10 lakh.
“Among the 3.7 crore individuals who filed the tax returns in 2015-16, 99 lakh show income below the exemption limit of Rs 2.5 lakh p.a., 1.95 crore show income between Rs 2.5 to Rs 5 lakh, 52 lakh show income between Rs 5 to Rs 10 lakhs and only 24 lakh people show income above Rs 10 lakhs. Of the 76 lakh individual assesses who declare income above Rs 5 lakh, 56 lakh are in the salaried class. The number of people showing income more than Rs 50 lakh in the entire country is only 1.72 lakh.”
The FM said that against estimated 4.2 crore persons engaged in organised sector employment, the number of individuals filing return for salary income are only 1.74 crore.
To draw a comparison with the spending in the country against the declared income, Jaitly said “In the last five years, more than 1.25 crore cars have been sold, and number of Indian citizens who flew abroad, either for business or tourism, is 2 crore in the year 2015.”
“From all these figures we can conclude that we are largely a tax non-compliant society. The predominance of cash in the economy makes it possible for the people to evade their taxes. When too many people evade taxes, the burden of their share falls on those who are honest and compliant,” he said.
While many in India clearly do not declare their real income, the demonetisation of Rs 500 and Rs 1000 notes has exposed the truth.
After the demonetisation, during the period November 8 to December 30, 2016, about 1.09 crore bank accounts received deposits between Rs 2 lakh and Rs 80 lakh with an average deposit of Rs 5.03 lakh per account. In nearly 1.48 lakh accounts, deposits of Rs more than 80 lakh were made with an average deposit size of Rs 3.31 crores.
“This data mining will help us immensely in expanding the tax net as well as increasing the revenues, which was one of the objectives of demonetisation,” Jaitley said in his budget speech.