That very few people pay taxes in India is a topic of unending debate. Commenting on the same, Revenue Secretary Ajay Bhushan Pandey says that when people say 3-4% of population pay taxes in India, they are necessarily talking about income tax (direct taxes), ignoring the fact that most people pay indirect taxes or consumption taxes.
The revenue secretary says even while talking about small number of income tax payees, one must keep in mind the (Income Tax) exemption limits.
The government had raised the threshold income for paying tax to Rs 5 lakh in the interim budget of 2019. According to data from the income tax department, there were 8.04 crore individual taxpayers in assessment year 2018-19 of which 5.95 crore filed returns. Of the return filers, around 3.5 crore individuals had shown their income up to Rs 5 lakh, leaving 5.5 crore taxpayers who actually paid any income tax.
"If we see the exemption limit, only people earning more than Rs 5 lakh are paying taxes. Even above Rs 5 lakh, there are certain deductions and exemptions which can be claimed. So people earning Rs 7-8 lakh, or Rs 60,000-70,000 per month are not paying taxes," said the revenue secretary when BusinessToday.In asked him about the raging debate on very few people paying taxes in India.
So you have to figure out how many people earn more than 70,000 per month and after having found that these are the exemption limits, we have to ensure the people who are above those limits are not only paying taxes but also correct taxes, said the revenue secretary.
Revenue from income tax accounted for only 24.5% and corporate taxes accounted for 27.7% of the Centre's gross tax revenue in 2019-20. The rest 48% came from indirect taxes like GST, customs, excise duty, etc.
If we add taxes collected by states, which mostly collect indirect taxes, then income tax accounts for around 15% of total taxes collected in India.
The number of individual taxpayers has increased from 4.96 crore in assessment year 213-14 to 8.05 crore in 2018-19. The number of individual return filers during the same time increased from 3.05 crore to 5.95 crore. Collection from personal income tax in 2013-14 increased from Rs 2.43 lakh crore to Rs 4.92 lakh crore in 2019-20. The government expects collections from income tax to fall to Rs 4.6 lakh crore in the current financial year.
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