Nearly two-third income tax return filers have zero tax liability

More than two-third of income tax return (ITR) filers have zero tax liability, data presented by the Finance Ministry on Monday showed. Data also showed that number of filers has gone up to 7.40 crore at the end of FY 2022-23 from 6.47 crore in FY 2019-20. Maharashtra leads the race in number of return filers followed by Gujarat and Uttar Pradesh.

Data presented by Finance Minister Nirmala Sitharaman in Lok Sabha on Monday showed that over 7.40 crore returns filed in FY 2022-23, out of which over 5.16 crore returns or around 70 per cent were with zero tax liability. Similarly in FY 2021-22, number of return filers and returns with zero tax liability were 6.94 crore and 5.05 crore (72 per cent respectively).

According to Income Tax Department, it is mandatory to file an income tax return if your annual income is higher than ₹2.5 lakh (₹3 lakh for 60 to 80 years and ₹5 lakh for 80 years plus) per annum.

Last date for filing return for salaried/non-corporate assessees whose accounts are not required to be audited is July 31 while it is September 30 for all companies and other persons (including working partners of firms) whose accounts are required to be audited.

Even those who have income less than taxable income, but need refund on account of tax deducted at source (TDS) or tax collected at source (TCS) are required to file returns. At the same time, for expenditure beyond a certain threshold on foreign tour, credit card or electricity bill etc., it is required to file the returns.

Also read: Section 234: What happens if you miss the tax deadline(s)

Reasons for increase

“There has been a 6.18 per cent increase in the number of persons filing income tax returns in FY 2022-23 as compared to persons in FY 2021-22,” Sitharaman said.

Further she listed various reasons for the increase. These include expansion of scope of tax deducted at source / tax collected at source (TDS/TCS) such as  huge cash withdrawals, foreign remittances, purchase of luxury cars, e-commerce participants, sale of goods, acquisition of immovable of property, purchase of overseas tour programme, transfer of virtual digital assets, net winnings from online games and interest on listed debentures paid to the resident.

Widening tax base

Meanwhile, officials said that Central Action Plan for FY 2023-24 has set the target for adding new filers at 10 per cent (of the filer base at the end of year 2022-23) as compared to 10.6 per cent achieved in FY 2019-20, 10.18 per cent achieved in FY 2020-21 and 8 per cent achieved in FY 2021-22.

In order to widen and deepen the tax base, in vitro fertilization (IVF) clinics, designer clothing stores, and NRI quota medical seats are on the Income Tax Department’s radar for tax evasion.

Another tool for widening and deepening the tax base is validation of PAN (Permanent Account Number). As on March 31, 2023, around 68 lakh PAN cards had been issued. The law provides for compulsory quotation of PAN for transactions such as buying an automobile or investing in mutual funds. Now, if one does not have a PAN, then he or she has to fill form 60 while carrying out these transactions.

These forms are submitted to the IT Department. “Efforts should be made to link these transactions with the PAN database. In case, PAN has not been allotted to a person, it should be allotted as per the provisions of the Act,” an official said.

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