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Tax base wider; but little change in mop-up: CAG

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NEW DELHI, March 15

THE Comptroller and Auditor-General of India (CAG) has said that the process of widening the tax coverage by the Revenue Department of the Finance Ministry has made ``little qualitative change'' in tax collection in terms of income grouping, particularly of higher income.

In his report on direct taxes for the year ended March 2001, tabled in Parliament on Friday, the CAG said the number of non-corporate assessees has increased by an average of 18.71 per cent per annum during 1996-2001. The increase has been the sharpest for income category B (higher) i.e., — income level of Rs 5 lakh and above but below Rs 10 lakh.

The number of assessees in the income category C (company and non-company assessments with income/loss of Rs 10 lakh and above) has increased by an average annual rate of 23.87 per cent.

But, despite the relatively faster increase in these two income groups, the coverage in terms of number of assessees as percentage to total households with an average income of Rs 5 lakh and above continued to remain ``poor'', the CAG observed.

It cited the household income survey made by the NCAER, which estimated that there were a total of 9.66 lakh households (5.69 lakh urban and 3.97 lakh rural) with an average annual household income in excess of Rs 5 lakh in 1998-99.

While there might be a number of households within these income groups where income of some of the individual assessees might be less than this level, there may also be a number of households with more than one assessee in these income groups. ``Even allowing for the agricultural income, which does not attract any income tax, the overall coverage of 4.197 lakh assessees in these two income groups show a ``coverage of around 50 per cent of the potential level'', the report said.

The other factor, which is crucial in determining the tax potential, is the coverage in terms of income. As per the All-India Income Tax Statistics (AIITS) for the assessment year 1997-98, the gross income reported by the non-corporate assessees was Rs 1,02,560 crore. This constituted only 8.86 per cent of the aggregate personal income as indicated by the National accounts of the year.

Given the inequalities of income where 5.70 lakh of the households had access to 25.89 per cent of the disposable income, this coverage fell significantly short of the potential. The recent drive for bringing individuals under tax net might not have pushed this up to even 10 per cent, it noted.

For corporate assessees, an average annual growth in income category B (higher) and C has not revealed any relative acceleration and their relative share in total corporate assessees has only marginally improved.

Overall coverage of corporate assessees in terms of the potential continues to be static at little over 60 per cent during this period.

Commenting on administration of direct taxes, it said that out of 314.06 lakh assessments for disposal, 125.48 lakh assessments (40 per cent) remained pending at the end of the year.

Total assessees as on March 31, 2001 were 232.13 lakh, which included 230.02 lakh income tax and corporation tax assessees, registering an increase of 31.11 lakh (15.48 per cent) over the earlier year.

Out of 40.84 lakh PAN (permanent account number) applications for allotment, 17.84 lakh (43.68 per cent) applications were pending at the end of the year. Total collection from various direct taxes for the year was Rs 68,305.39 crore. In the case of corporate assessees, 75 per cent and in the case of non-corporate assessees, 93 per cent of total collections were made at pre-assessment stage.

However, the CAG noted that Rs 56,431.25 crore on account of income tax and corporation tax remained uncollected as on end-March 2001.

The CAG report noted that corporation tax collections amounted to Rs 35,696.27 crore during 2000-01 and constituted 52.26 per cent of total collections of direct taxes.

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