No big fish among new taxpayers, says CEA
Average income of new taxpayers is around `2.7 lakh
While there is a lot of talk of new taxpayers being added after demonetisation, an analysis by the Economic Survey volume 2 shows that majority of them are just small tax payers.
According to the Economic Survey, average annual income of new individual tax payers added in post-demonetisation period is just `2.7 lakh which is not “far above the tax threshold of `2.5 lakh.”
Annual income below `2.5 lakh is not taxable and those with annual income till `3 lakh may not pay tax after including rebate.
The Survey, authored by the chief economic advisor, said impact of demonetisation can be judged by measuring the increase in taxpayers in the postdemonetisation period (November 9, 2016 — till end of March 2017) relative to the increase in the same period the previous year. It said that the growth of taxpayers postdemonetisation period was significantly greater than in the previous year at 45 per cent against 25 per cent in same period last year. The addition in November 9, 2016—till end of March 2017 period “amounted to about 5.4 lakh taxpayers or 1 per cent of all individual taxpayers in just a few months.” It said that the addition to the reported taxable income (of these new payers) was about `10,600 crore in the said period.
So, the Survey said the tax base did expand after demonetisation. “It is, however, interesting that the average income reported of the new taxpayers — `2.7 lakh — was not far above the tax threshold of `2.5 lakh, so the immediate impact on tax collections was muted,” said the Economic Survey volume 2 tabled in the Parliament on Friday.
It said that the full effect on collections will materialise gradually as reported income of these taxpayers grows.
Last week Income-Tax department in a press release had claimed that as a result of demonetisation and Operation Clean Money, there is a substantial increase in the number of incometax returns (ITRs) filed.
“The growth in returns filed by individuals is 25.3 per cent with 2.79 crore returns having been received upto August 5, 2017 as against 2.22 crore returns in the corresponding period of FY 2016-2017. This clearly shows that substantial number of new tax payers have been brought into the tax net subsequent to demonetisation,” the statement had said.