Indians becoming more tax compliant? Personal income tax collection up 19.5% as of February 2017

S V Krishnamachari
tax collection data, indirect taxes, direct taxes, income tax, corporate tax, modi govt, budget 2017, arun jaitley

In his Budget 2017 speech, Union Finance Minister Arun Jaitley described Indians as a largely non tax-compliant society, citing statistics.

"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....From all these figures we can conclude that we are largely a tax non-compliant society," were his famous words.

Figures for personal income tax released by the Narendra Modi government on Friday partly belie those claims. Personal income tax collection increased 19.5 percent, after accounting for refunds, during the 11-month period (April 2016 to February 2017) this financial year as compared to the corresponding period last fiscal.

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The spike could also be the result of sustained efforts to chase evaders as well as amnesty schemes initiated twice during the year.

In sharp contrast, the corporate taxes paid by businesses rose by a paltry 2.6 percent, after adjusting for refunds.

The 11-month period saw refunds growing 40.2 percent to Rs 1.42 lakh crore.

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Total net direct tax collection stood at Rs 6.17 lakh crore, an increase of 10.7 percent over the corresponding period last year and 72.9 percent of the budget estimates for the current fiscal (2016-17).

Indirect tax collection rose 22.2 percent to Rs 7.72 lakh crore to reach 90.9 percent of the revised estimates for the current financial year, the finance ministry said in a statement.

On the indirect taxes front, net central excise collection increased 36.2 percent to Rs 3.45 lakh crore, net customs duty revenues rose 5.2 percent to Rs 2.05 lakh crore while service tax collection jumped 20.8 percent to Rs 2.21 lakh crore.

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For February, net indirect taxes grew 8.4 percent in comparison to February 2016.

In another significant data that came from India Inc., domestic car sales grew 4.9 percent to 1.72 lakh units last month as against 1.64 lakh cars sold in February 2016.

Commercial vehicle sales increased 7.34 percent to 66,939 units, YoY while two-wheeler sales declined marginally to 13.62 lakh units.

The BSE Sensex was trading 13 points lower at 28,916 at around 2.48 pm after having opened with a 125-point gain in the morning. Top Sensex losers were ICICI Bank, State Bank of India and Tata Steel.

Here are some of the key aspects highlighted by Jaitley in his Facebook post in January, which were also part of his Budget speech on February 1: 

  • In the year 2015-16, 3.7 crore assesses of the total population of over 125 crores, filed income tax returns.
  • Out of these, 99 lakhs declared income below Rs.2.5 lakhs and paid no taxes; 1.95 crores declared income less than Rs.5 lakhs; 52 lakhs declared income between Rs.5 to10 lakhs, and only 24 lakhs declared income above Rs.10 lakhs.
  • No better evidence is required to substantiate that both in the matter of direct and indirect taxes India continues to suffer being a hugely tax non-compliant society.
  • When 86 percent of a country's currency constituting 12.2 percent of its GDP, is squeezed out of the market and sought to be replaced by a new currency, there would obviously be significant consequences. 

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