Shortfall in personal levy hits direct tax collection

A shortfall in the personal income tax collection resulted in the union government closing the financial year with the direct tax mop-up at Rs 11.38 lakh crore as compared to the target of Rs 12 lakh crore for 2018-19. The direct tax includes personal income tax and corporation tax.
While the corporate tax collection stood at Rs 6.71 lakh crore, personal income tax took a beating last year. The I-T department collected Rs 4.67 lakh crore against the target of Rs 5.29 lakh crore in personal income tax. This included Rs 11,000 crore on account of securities transaction tax.
“The entire shortfall of Rs 62,000 crore is on account of personal income tax. It is harder to get people to pay taxes than to make them file returns,” said a senior official in the finance ministry.

The direct tax collection showed a growth of 13.6% over last year as against the target of 20.1% for 2018-19. In the Interim Budget, the direct tax collection target for the past year was revised at Rs 12 lakh crore, up from the budget estimate of Rs 11.5 lakh crore which represented a growth target of 15%. The higher revised target was seen as unrealistic by many in the government.
As many as 6.78 crore tax returns were filed during the last year. However, the number of people who filed returns were only 5.43 crore. This is mainly due to many taxpayers filing their returns twice, mostly to make corrections.
According to the government, the taxpayers’ base has gone up exponentially in the past four years with the number of return filers almost doubling in a short time. “This has, however, not resulted in higher tax collections in similar proportion,” pointed out the official.

A taxpayer is a person who has either filed I-T return or in whose favour tax has been deducted at source.
The number of people under the taxable category is expected to further decrease as anyone earning up to Rs 5 lakh will not have to pay income tax during the current financial year 2019-20. The income-tax threshold limit was increased to Rs 5 lakh per annum in the Interim Budget. In fact, individuals with annual gross income up to Rs 7-8 lakh are likely to avail the benefit if they make investments under the instruments such as Public Provident Fund (PPF) as well as pay home loan.
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This would lead to over 3 crore people getting tax exemption. The impact on the exchequer is likely to be around Rs 22,000 crore or more. The Interim Budget 2019-20 has estimated to collect Rs 13.80 lakh crore from direct taxes, representing a growth of 15%.
With lower direct tax revenue growth seen in 2018-19, the growth target of 15% for the current year will also have to be revised upwards to maintain the tax collection target.