While the government claims that there has been a surge in the Income Tax (IT) returns post demonetisation, which shows the increase in tax compliance in India, an Indian Express report claims that as many as 88 lakh taxpayers turned out to be ‘stop filers’- people who did not file tax returns in a given year despite doing so in previous years.

Numbers have dipped

The Indian Express reported that in 2016-17, the number of stop filers increased to 88.04 lakh from 8.56 lakh in 2015-16. This amount is reportedly the highest in the last two decades since 2000-01. The number of stop filers has been consistently falling from 37.54 lakh in fiscal 2013 to 27.02 lakh in fiscal 2014, 16.32 lakh in fiscal 2015 and 8.56 lakh in fiscal 2016.

According to officials, this can be due to loss of jobs or drop in income due to 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. The act of banning 86% of the country’s currency in circulation in 2016 has been a contentious issue.

Definition of taxpayers

According to the daily, in April 2016, the Central Board of Direct Taxation (CBDT) changed the definition of a taxpayer to include people who paid tax through TDS /TCS, even if they did not file returns. The definition of tax base was also modified to include such people, in whose case TDS and TCS were paid but returns were not filed in any of the three financial years previous to the year under consideration. However, the CBDT said that the definitions have not changed, but merely were defined for the first time for consistency.

The CBDT said, “The definitions were not changed, rather these non-legal words of common parlance were defined for the first time for consistency within the department and across different time periods. The definition of tax base and filer base have been consistently followed over the last six years and there is no artificial jump in taxpayer/filer data merely on account of a formal definition of these terms.”

Reportedly, by doing so the IT department added 1.13 crore TDS deductees. It has added about 39.34 lakh TDS deductees to the taxpayer base between assessment years 2014-15 and 2016-17.

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