88 lakh taxpayers didn't file returns in demonetisation year: Report

There are several reasons that could have led to the spike in stop filers. The two main reasons could be - job loss and drop in income.

Income-tax returns (ITRs) have seen a surge post demonetisation and GST introduction, and the government claims these numbers suggest a surge in tax compliance in the country. However, according to Indian Express as many as 8.80 million taxpayers turned out to be 'stop filers' - those who did not file tax returns in a given year despite doing so in previous years- in the financial year 2016-17 - the year Prime Minister Narendra Modi demonetised high-value currency notes.

(Business Standard)

Records accessed by The Indian Express reveal a massive spike in the number of “stop filers” in the same year, reversing a four-year trend. In 2016-17, the number of stop filers jumped 10-fold to 8.80 million from 856,000 in 2015-16, the highest increase since 2000-2001.

Who are 'stop filers'?

Stop filers are individuals who filed returns previously but didn't do so in the current year. They do not include taxpayers who have passed away or whose PAN cards have been cancelled or surrendered.

Here's what the latest report on 'stop filers' reveals

In 2013 the number of stop filers was 3.75 million. Since then there was a continuous slide in the number of stop filers. It slipped to 2.70 million in 2014, 1.63 in fiscal 2015 and 856,000 in fiscal 2016.

Records show that the trends reversed in 2017-2018. The number of stop filers jumped to 8.80 million, highest in almost a decade.

Reasons behind the spike in stop filers in 2017-2018

There are several reasons that could have led to the spike in stop filers. The two main reasons could be

— job loss

— drop in income

The Indian Express quoted officials as saying that the number may have increased because of a fall in economic activity. “Typically, the number of stop filers reflects a compliance and enforcement gap, which the tax administration fails to enforce,” said an official. “But this huge increase in stop filers for 2016-’17 cannot be attributed to sudden changes in compliance behaviour. The spike could be due to a fall in income or loss of jobs during the year.”