I-T compliance set to fall for first time in 4 years

Income tax compliance is likely to fall substantially to pre-demonetisation levels for the financial year ended March 2019. This is the first such decline in over four years even as the government has been patting itself over the fact that demonetisation has helped increase tax base.

So far, the compliance level of income tax payers has shown an annual decline of 13.7% to 79.1% in 2018-19 from 91.6% in 2017-18, the analysis of data available with the I-T department shows. Even as the last date for filing is set as July-end, experts don’t see much uptick in the filings as the country is busy with general elections.

Analysts across the spectrum are attributing the phenomenon to the fact that the government has not been going tough on compliance in the build-up to the elections in a bid to woo middle-class voters. “The government has not been very tough on compliance, with general elections in mind. Middle class contributes a substantial chunk of the voters,” an analyst, not wishing to be named told DH.

Urban middle-class voters have traditionally been seen as the core base of the incumbent BJP. According to other analysts, the windfall of first-time filers that the country saw post-demonetisation might have also stopped, resulting in a drop in compliance.

In two years post-demonetisation, the country had seen single-digit growth in compliance levels. In 2017-18, the compliance level stood at an astounding 91.6%, up 7.7% from 85.1% in 2016-17.

During 2016-17, the compliance level had grown by 2.5% year-on-year (Y-on-Y) to 85.1%.

“This is coming as a surprise for all of us. Ideally, post note ban the numbers should have continued to grow,” a tax analyst told DH.

What could be more worrying for the government is the fall in the total number of filers of income tax. According to data, only 66.8 lakh people have filed I-T returns till now — which is 1% lower than 68.5 lakh filings the I-T department received in 2017-18, data posted on the I-T department website shows.

Experts expect it to put pressure on revenues.