Saturday, March 12, 2011

Salaried class which includes Pensioners bears most of tax burden in India

Salaried class which includes Pensioners bears most of tax burden
Numbers of Tax Assessees in India –Financial year 2009-2010 =34085426
Effective tax base is Just 1.5 cr tax payers
Well-to-do professionals pay little tax
MORE  than half  of India's 3.4 crore income tax payers con­tribute  insignificant amounts as tax, with fig­ures ranging from a paltry Rs50  to  Rs1,000  in  most cases. This reduces the effective   tax   base   to around 1.5 crore tax pay­ers, which includes mainly corporate houses and the salaried class, according to   senior   officials    of the    income-tax    (I-T) department. 
Well-heeled independent pro­fessionals, like chartered accountants, doctors, lawyers, big shopkeepers and wholesale traders make up the category of income tax assessees who add to the number of people under the tax net but contribute virtu­ally nothing to the national exchequer. 
Senior I-T officials are of the view that the cost to the depart­ment for maintaining these files would probably exceed the tax collections from this category. 
While even the figure of 3.5 crore income tax assesses is considered small for the size of India's urban population, the fact that the number of effective tax payers is less than half this number makes matters even worse for resource mobilization. Independent professionals and traders with lavish lifestyles are reported to be filing tax returns that reflect incomes ranging from a mere Rs1.5 to RS5 lakh a year. The big cars that they use are bought in the names of business entities. 
"These assesses have been showing withdrawals from their bank accounts of a paltryRs10,000 or so to run their monthly expenses, which just doesn't make any sense," a sen­ior official said. 
Several big retail showroom owners in the Capital are reported to be showing losses on their accounts books. The financial figures indicate that the business should have been shut down as the premises would bring in a huge rent but this is not happening either, an official pointed out. 
Senior officials say there has to be a culture of tax compliance that is missing in India. 
 While tax evasion is wide spread, the I-T department does not have enough manpower or resources to chase all the dodgers and make them cough up the due amounts. Since the black money transactions take place in cash it is difficult to track them down. A single assessing officer could be burdened with as many as 10,000 files and it is difficult for him or her to examine all of them in minute detail.
The extent of tax evasion is evident from the fact that when the investigation wing of the       I-T department conducts raids on the premises of suspected tax dodgers, the income declara­tions result in tax collections of as much as Rs100 crore. In fact a Rs5-10 crore collection is quite common, a senior official said.

According to official figures released, corporate tax collections stand at           Rs 2,78,411 crore, accounted for as much as 83 per cent of the total direct tax collections of Rs 3,36,117 crore during April-February of this fiscal.
          The figure show that while direct tax collections grew by 21 per cent during this period, cor­porate tax went up by 24 per cent. Personal income tax increased by 15 per cent to touch Rs1,12114 crore, which was mainly from the salaried class which includes Pensioners .
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