Income Tax Return filing Fees may be introduced by Budget – 2022?

 

Finance Minister Nirmala Sitharaman is seeking suggestions from stakeholders for its annual budget for 2022-23 to be presented in the parliament on 1^ST Feb 2022. Every budget is a time to introspect and retrospect and explore the possibility of generating additional revenue so as to achieve its social economic objectives.

Another one in the pipeline could be the introduction of the “Income Tax Return filing Fees”

The present income tax return filing process is coupled with following statistics:

1. Only 8,600 individuals have revealed that their annual income is above Rs 5 crore.

2. About 42,800 people have declared taxable income of over Rs 1 crore annually.

3. Further, four lakh people with income more than Rs 20 lakh.

4. Only 2,200 doctors, chartered accountants, lawyers and other professionals have disclosed annual income of more than Rs 1 crore from their profession.

5. 1% of the taxpayers account for 63% of the income taxes revenue contribution.

6. In short, 99% of taxpayers are filing the return within minimal taxes.

7. Only 1.46 crore individuals in India are liable to pay income tax, which is less than 1% of the population.

8. Out of gross tax revenue of Rs 24,23,020 crore for 2020-21, the income tax was budgeted at Rs 6,38,000 crore which comes to 26.30% of total revenue receipts. Corporate tax of Rs 6,81,000 crore (28%), GST Rs 6,90,500 crore (28.5%), excise duties Rs 2,67,000 crore (11%), customs Rs 1,38,000 crore (5.70%), and service tax Rs 1,020 crore (0.045%).

In short, there are many taxpayers who are filing the income tax return but are not paying any income tax to the Government Treasury.

The non tax-paying population has also suddenly increased after the income tax Act which has incorporated section 87A. It may be noted that section 87A provides that the entire tax would be offered as rebate if the income doesn’t exceed Rs. 5 Lakh. Similarly, individuals /HUF are required to file the return even if they have loss in the business or under other source if they intend to have the benefit of carry forward of such loss.

As far as partnership firm, trusts and companies are concerned, they are required to file the income tax return compulsorily even if they don’t have taxable income or not required to pay the tax for the reason that their income is nil.

In short, there are numerous cases wherein the income tax return is filed but no tax is paid to the Government treasury.

Every return filed has an administrative cost like its acceptance, processing, communication, Updation, etc. And all this is done by the income tax department without a single rupee of collection from the taxpayer

To overcome this, the Government may plan to introduce the concept of “Return filing fees” wherein a minimum filing fees of RS. 1000/- for Individual taxpayers and Rs. 5000/- to Rs. 10,000/- for firms and companies may be introduced in the Budget-2022.

As a result of this, the Government may likely be able to generate consistent revenue of around 3000 Cr. This will also be used as a tool of ensuring quality data and return by the department as unwanted return filing would be curtailed after the return filing fee concept is introduced.