Pay high income tax? Govt may call you to have tea with the PM or FM

The idea is to encourage taxpayers to willingly pay more.

In a rather unconventional plan, the Ministry of Finance has decided to reward India's top income tax payers by inviting them to tea with the prime minister or the finance minister.

The idea is to encourage taxpayers to willingly pay more, according to a report published in Livemint. The scheme is likely to figure in Modi's government's first Budget session, after being re-elected in the recently conducted Lok Sabha elections. Along with the privilege of having tea, the taxpayers will also get other non-monetary incentives.

Government data shows that 1,053 individuals with incomes of Rs 5 crore or more contributed over Rs 12,000 crore in personal income tax in assessment year 2017-18.

Currently, the income tax department issues certificates of appreciation to those who pay their taxes diligently.

The plan to honour top taxpayers comes amid the government's need to meet the fiscal deficit target and the revenue department's need to find additional resources for welfare schemes.

Direct tax receipts for the year ended March 31 missed the government’s revised target of Rs 12 trillion. At the close of the fiscal year 2018-19, direct tax collection touched Rs 11.5 trillion, leaving a gap of Rs 50,000 crore against the revised revenue target of Rs 12 trillion.

An expert committee on revamping the Income Tax Act is expected to submit its report by the end of July.

Tax bracket

At present, individuals who earn between Rs 50 lakh and Rs 1 crore a year pay a surcharge of 10% and those with incomes above Rs 1 crore pay a 15% surcharge on their taxable income. Businesses, too, pay surcharge on incomes above Rs 1 crore.

Domestic companies with incomes in the range of Rs 1-10 crore, a 7% surcharge is applicable

Surcharge goes up to 12% for domestic companies and 5% for foreign companies with incomes above Rs 10 crore.

Business Standard

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.”