While the number of those who filed income tax returns has increased in the past four years, the number of those who actually paid income tax has decreased substantially, data from the Union government shows.
On July 24, Finance Minister Nirmala Sitharaman presented data before the Lok Sabha on the number of persons who filed income tax in the last four years, and the number of returns that amounted to zero liability.
The data showed that the number of individuals who filed income tax returns increased from 6.47 crore in 2019-’2020 to 7.40 crore in 2022-’23. The finance ministry cited the expansion of the scope of tax deducted at source and tax collected at source, simplification of personal income tax, pre-filling of income tax returns and the facility of updating returns within two years as reasons for the increase.
However, the number of persons whose income tax returns amounted to zero liability increased sharply in 2020-’21 and rose in subsequent years as well. While there were over 2.90 crore such persons in 2019-’20, there were over 5.15 crore of them in 2022-’23.
This meant that while 3.57 crore persons paid money in the form of income tax in 2019-’20, the number declined to 2.23 crore in 2022-’23.
Vikram R, a tax expert from Chennai, said that the Covid-19 pandemic reduced income and slowed businesses, due to which the number of zero tax filings may have increased since 2020-’21, The Hindu reported. “There were also a few additional exemptions announced during the pandemic,” he noted.
Akhil Chandna, a partner at Grant Thornton Bharat, said that the reduction in the number of persons who paid income tax may have been because the number of first-time taxpayers, who may not fall into the tax bracket, increased.
“The copy of tax return is requested for various purposes like application for loans, processing of visa, and filing of tax returns is important to meet such requirements,” he noted. “Hence, more and more individual taxpayers are filing tax returns even if there is nil tax liability.”