New Delhi, January 29, 2017
RBI yet to work out dividend payout; personal income tax collections could rise by 10%
The government may showcase gains in tax collections as an immediate windfall of demonetisation, as it may take months to compile the actual benefits in value terms.
Besides, the Reserve Bank of India is yet to work out the dividend it will pay to the Centre following the gains, if any, post demonetisation. The RBI pays to the Centre as dividend the surplus from its investment activities.
For 2016-17, the Centre has budgeted raising ₹69,897 crore as dividend and surplus from the RBI and other State-owned banks and financial institutions, which is slightly lower than the ₹73,905 crore last fiscal.
Though projections have been made of gains from this move, in December RBI Governor Urjit Patel had ruled out a special dividend by the bank to the government after demonetisation of high value currency.
“Given the magnitude it is difficult to assess the windfall immediately…the entire process will take months to complete. However, another way of looking at the benefits of the decision is the tax collections and higher number of individuals coming under the tax net even though they would have filed zero returns in the first year,” an official told BusinessLine.
Finance Minister Arun Jaitley, on January 8, talking about “Demonetisation – A Look Back at the last Two Months” wrote about a new normal. He said in 2015-16, 3.7 crore assessees of the total population of over 125 crore, filed income tax returns. Of these, 99 lakh declared income below ₹2.5 lakh and paid no taxes; 1.95 crore declared income less than ₹5 lakh; 52 lakh declared income between ₹5 and ₹10 lakh, and only 24 lakh declared income above ₹10 lakh.
“No better evidence is required to substantiate that both in the matter of direct and indirect taxes India continues to suffer being a hugely tax non-compliant society,” the Finance Minister had observed adding that tax evasion has neither been considered unethical nor immoral, and several governments have allowed this normal to continue even though it compromised with larger public interest.
But, the Prime Minister’s decision (November 8) is intended to create a new normal that seeks to change the expenditure pattern of India, Jaitley said.
The tax authorities expect some significant gains in the tax collections, post demonetisation. “There is no specific estimate as such but personal income tax collections can increase by at least 10 per cent to 15 per cent with more deposits in the banks as well as investigations into income sources of people,” said an official.
Incidentally, the Revenue Department had also informed the Public Accounts Committee of Parliament recently that tax base will widen and deepen post demonetisation as suspect deposits of significant amounts into banks will be verified. Government officials have also pointed out that compared to the sale of luxury goods and items like cars, very few people declare annual income of over ₹10 lakh in their tax returns.
To widen tax base
Prime Minister Narendra Modi is keen to double tax base to 10 crore. The confidence of the Tax Department also comes from the fact that many would be taking advantage of the income disclosure scheme — a sort of amnesty scheme — though the government would not like it to be seen as amnesty.
[The Hindu Business Line]