According to recently released time series data from the Income-tax department, the combined number of income tax returns (ITRs) submitted by personal income tax filers (PIT), which includes both individuals and Hindu Undivided Family (HUF), experienced a substantial 94% increase during the initial nine years of the Narendra Modi government, spanning from FY15 to FY23.
In FY23, a noteworthy 74.6 million personal IT returns were submitted, in stark contrast to the 38.4 million filed in FY15.
This achievement underscores the substantial success in expanding the taxpayer base and has the potential to bolster revenue receipts in the forthcoming years. Despite this impressive growth, it’s worth noting that PIT collections increased by 213% from FY15 to FY23, though the rate of growth was somewhat slower compared to the preceding decade.
Numerous factors have played a pivotal role in this surge, as acknowledged by experts. These include the digitization of tax administration, reduced compliance burdens, rising income levels, and the expanded coverage of the TDS (Tax Deducted at Source) regime.
The digitization of tax administration and simplified compliance procedures stand out as the primary catalysts behind this upsurge. The transition to electronic filings, coupled with the analysis of transaction data, has significantly enhanced the ease of taxpayer compliance.
Additionally, the introduction of a faceless system for income tax assessment has liberated the Revenue Department’s resources, allowing them to focus on intelligent analysis and improve tax compliance.
The broadened scope of payments covered by the TDS (Tax Deducted at Source) regime ensures that transaction data is captured at the source, thereby promoting greater tax compliance and boosting revenue collections.
In FY18, following the demonetization initiative aimed at formalizing the economy and expanding the tax base, PIT returns recorded a substantial 23.4% year-on-year increase.
This fiscal year marked the highest surge in ITRs, although PIT collections in FY18 experienced a growth of 19.9%, albeit at a somewhat slower pace compared to the previous year.
Interestingly, in FY22, the number of ITRs decreased by 1.2% year-on-year, even as PIT collections surged by 43.5% from the reduced base of the previous year.
Important: Easy Guide to File ITR 1 by Gen Income Tax Return Software
Tax experts have attributed this phenomenon to a more targeted approach to tax assessments by the tax department and the effective utilization of technology and data analytics, which have contributed to the enhancement of tax receipts.
