Data released by the tax department shows that tax concessions and moderate increments slowed down the expansion of direct taxpayer base in the first two years of the Narendra Modi administration. It expects the trend to reverse post-demonetisation. It also showed that the number of individual taxpayers filing returns has grown but at a slower pace for four years in a row starting 2012-13, when there was increase of 54,00,000.
Widening the base, however, remains a concern. It has been seen that in the first two years of the current regime, the number of individual taxpayers rose from 54 million in 2013-14, the year before Modi swept to power, to 59.3 million in 2015-16, an increase of 53,00,000. But, with at least 91,00,000 taxpayers added after demonetisation, the government is hoping to significantly widen the base. Tax experts said part of the reason for the moderation in growth in the direct taxpayer base are the concessions offered by the Modi government.
Samir Kanabar, partner at Ernst & Young said, “The reduction in individual taxpayers could be a consequence of increase in basic ceiling of taxable income for individual taxpayers in 2014-15. The data of 2015-16 is prior to demonetisation- if not only has carry-over effect of reduction in basic taxable income but also marginal increase in income of salaried class.” In 2015-16, the falling trend of direct taxes as a percentage of the Centre's overall tax collection also continued as the share of service tax in overall kitty went up. In fact, for the first time since 2006-07, direct taxes accounted for less than half the tax collections, data released by the government showed. But on the positive side, it was a year in which the trend of falling ratio of direct taxes to GDP was reversed.
