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The number of people filing income tax returns has declined by a full 1 per cent in fiscal 2019, despite the increased government focus to broaden the base, indicating a deepening slowdown in the overall economy, says a brokerage report.
Citing official data, a report by brokerage Kotak Securities said that only 66.8 million returns were filed in FY19 as against 67.5 million in the previous fiscal.
“This is surprising given that post-demonetisation, it was expected that the tax base would continue to increase,” the note said and warned that such a happening is a worry from the fiscal math perspective.
The report warned that the falling tax numbers do not offer “much comfort” to the overall marcoeconomy, as this corroborates the fact that a number of economic activity indicators are signalling a slowdown in parts of the economy.
The report questions whether compliance was weaker in the latter part of FY19 and said it expects the new government will aim at increasing the filings and collections in FY20.
Tax base
“The government needs to look at further expanding the tax base (optimally using the data repository from note-ban and GST). Without a significant improvement in the tax base, the medium-term growth path will be at risk,” it warned.
The brokerage said there has been an increase in the filers in the higher income brackets and that data analytics will hold the key from here on.
A relatively muted tax filing growth will create further headwinds in an already stressed fiscal space, it said.
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