The latest release of income tax returns statistics by the Income Tax Department, covering the assessment years from 2019-20 to 2021-22, shines a light on the shifting patterns in tax compliance. The emerging data reveals an evolution in taxpayer profiles, particularly a trend towards higher-income brackets. At the same time, it emphasizes ongoing challenges in ensuring compliance among all those eligible to file tax returns.
Understanding the Concepts: Income Tax and Income Tax Returns
Income tax represents a direct tax levied on the yearly income of both individuals and businesses earned within a fiscal year. The Indian legislative power reins over this taxation system under The Income Tax Act, 1961. On the other hand, an Income Tax Return is a formatted document that records an individual’s income in the financial year and the taxes paid on that income. This form not only provides a detailed account of earnings and taxes but also aids in carrying forward losses and claiming refunds from the Income Tax Department.
Key Learnings from Recent Income Tax Return Statistics
For the assessment year (AY) 2021-22 (financial year 2020-21), a total of 6.75 crore taxpayers submitted their income tax returns. This figure marked a 5.6% increment from the previous year’s 6.39 crore filings. However, around 2.1 crore taxpayers paid taxes without filing returns.
The taxpayer base has shown a consistent increase over recent years, growing from 5.87 crore in AY 2018-19 to 6.75 crore in AY 2021-22. Nevertheless, the fraction of taxpayers contributing no tax has swelled from 40.3% in AY 2018-19 to 66% in AY 2021-22.
The data indicates a shift of individual taxpayers towards higher income brackets over time. However, critiques emphasize a growing wealth divide between India’s ultra-rich and its middle class, intensifying concerns about economic fairness and the hardships faced by the middle class in securing steady financial progress.
Understanding Assessment Years
An assessment year refers to the period during which income earned in a particular financial year is evaluated or assessed for tax purposes. It refers to the year immediately following the financial year for which the income is being assessed.
About the Central Board of Direct Taxes
The Central Board of Direct Taxes (CBDT) is a statutory authority operating under the Central Board of Revenue Act, 1963. The purview of CBDT extends to shaping direct tax policies and strategies in India and overseeing the implementation and execution of direct tax rules through the Income Tax Department.
Reflection on Black Money Creation and Effects
A question from UPSC Civil Services Examination, Previous Year Questions (PYQs) Prelims Q suggests that the creation of black money has raised significant concerns for the Government of India, specifically due to the loss of revenue to the State Exchequer as a result of tax evasion. The emergence of this issue further emphasizes the relevance and urgency of ensuring comprehensive tax compliance.
