Of Income Tax Payers....

Tax concessions and moderate increments have slowed down the expansion of direct taxpayer base in the first two years of the Narendra Modi government, a trend that it expects to reverse post-demonetisation.

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 an increase of 54 lakh. But ever since then, the numbers will not bring cheer as far as widening the base is concerned. In fact, in the first two years of the current regime, the number of individual taxpayers rose from 5.4 crore in 2013-14, the year before Modi swept to power, to 5.93 crore in 2015-16 — an increase of 53 lakh.

But with at least 91lakh taxpayers added-post demonetisation, the government is hoping to significantly widen the base.

Tax experts say part of the reason for the moderation in growth in the direct taxpayer base are the concessions offered by the Modi government.

For instance, in his first Budget after the elections, finance minister Arun Jaitley had increased personal income tax exemption limit by Rs.50,000, which was seen as a reward for the middle class. This move is seen to have pushed several individuals out of the net. In 2015, he followed it up with more deductions for health insurance and pension.

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.

But on the positive side, it was a year in which the trend of falling ratio of direct taxes to GDP was reversed.

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