Reforms in IT department, ‘strengthening’ economy led to record tax revenue: CBDT chairman

Reforms implemented by the government within the Income Tax Department and the ‘boost’ of the Indian economy are among the main factors that have resulted in the highest direct tax revenues in the country, totaling over £13.63 billion, CBDT- Chairman JB said Mohapatra.

He said fears about the state of the economy being battered by the spread of COVID-19 have been allayed because it was “doing so well and businesses came out so well [in paying taxes]’ during the current fiscal year 2021-22.

Mr Mohapatra exuded confidence that direct tax recovery, which primarily includes personal income and corporate tax revenues, will continue on its current trajectory and the ministry will be able to meet the target of collecting $14.20 billion in taxes .£ successfully pursue next fiscal.

“It’s going to be very difficult to say how things will play out over the next year, but there’s no room to say that good times only last four quarters,” Mr. Mohapatra said PTI in an interview.

The Central Board of Direct Taxes (CBDT) is the governing body of the IT department and according to its announcement on March 17th, the collection of direct taxes (as of March 16th) in India has broken all previous records.

The CBDT chief listed the reasons he believes led to the record collections.

“The first priority is to strengthen the Indian economy. The better the economy, the better the tax cut that’s taking place.” “The second reason will be the interdepartmental reforms that affect the IRS’s own census numbers,” he said.

There are policy actions that have been taken on-budget or off-budget over time that are now giving the “rebound effect” or dividends, Mr Mohapatra said.

“The third reason, I would say, will be the reforms within the department … which have been continuous over the past four years.

“Probably we’ve changed more than ever in the history of this department, and these reforms are taking a while to gather momentum and produce results,” he said.

Mr Mohapatra said after three to four years of working on the reforms, both the taxpayer and the department were becoming familiar with the new processes and procedures and they were “slowly bearing fruit”. “So the point is that the reforms, once triggered, do not produce results immediately, but take time to imprint themselves in the spirit, consciousness and also the operational culture of the department. So now is probably the time when we see the results of the reforms in the department,” he said.

The fourth factor, Mr. Mohapatra said, is “small but important” and relates to technology adoption in the IT department.

“For example the annual information system [AIS] in which more and more information about the financial transactions they would have made in the year is now being provided to the taxpayer. This leads them to voluntary compliance.

“From the collection of over 13.63 lakh crore [as on March 16]only about ₹54,000-55,000 crore comes from the regular tax assessment [under which tax is paid by the assessee after department issues notice to them].

“The rest of the collection comes through voluntary compliance. This is happening because taxpayers are being empowered with the financial information available to them,” he said.

Taxpayers used to “fight” to get this information, but now they have it at their fingertips, the CBDT boss said. “So that also helped the taxpayer pay the right amount of tax,” he said.

Mr Mohapatra said that by the end of this fiscal year on March 31, net or actual tax revenue should be settled after the refunds due are issued “from 13.5 lakh crore”. The IT department was given a target to collect 11.08 lakh crore (budget estimates) this fiscal year and it was later revised to 12.50 lakh crore. Mr. Mohapatra said the collections were the highest among any heads this time. He issued a breakup to back up his point.

This year to March 16, the collection in the pre-tax category was 6.62 lakh crore, which is 40.7% more than 2020-21, 50.6% more than 2019-20 and 30.8% more than 2018- 19 equals, he said.

Similarly, the collection in the tax withheld at source (TDS) category is 6.79 lakh crore, which is 37.7% more than 2020-21, 40.5% more than 2019-20 and 51.9 % more than 2018-19 matches, he added.

The collection under the Self Assessment Tax (SAT) category, Mr Mohapatra said, totals ₹1,34,318 crore, which is 34.9% higher than 2020-21, 36.1% higher than 2019-20 and 42.9% higher than 2018. 19.

Under the regular tax category, he said the collection is £55,238 million – up 46.5% from 2020-21 and 8.9% from 2019-20.

For the STT (stock securities transaction tax) category, the government had set a target of 12,500 crore earlier in the year and it has been raised to 20,000 crore in the revised estimates, the CBDT chief said.

“We are over ₹22,000 crore (until March 16). Thus, all components, sub-components, gross and net figures are the highest in the history of the department.

“These are very large numbers and this has come at the most opportune time in the history of the department,” he said.

Mr Mohapatra said the department had not yet completed a “sectoral analysis” to say how different sectors of the economy were faring.

“Sectors that have done well will be the ones that are doing well in the current period, like banking. However, we have yet to complete the sector analysis. I’ll come back to that later to say which sectors did well and which didn’t,” he said.

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