Less than 2 per cent Indians pay income-tax

Hyderabad/New Delhi: It’s official. India has a huge parallel unaccounted economy as the newly released tax data by the government indicates that just 2.88 crore people have filed returns in FY12-13 — 2.27 per cent of  India’s population.

Of this, a small percentage actually pays income-tax as 89 lakh of salaried people and 1.4 crore of business people reported less than Rs 5 lakh income.

As per income-tax rules, an individual cannot escape from paying income-tax if he earns more than Rs 5 lakh (after basic threshold and claiming deductions for HRA/Section 24, Section 80C, 80D, 80CCF).

If the tax data is considered along with the tax threshold post-deductions,  it shows that an unbelievable number of over 98 per cent of Indians earn less than Rs 5 lakh a year or little less than Rs 45,000 a month.

Of this, only 8.74 lakh people have reported business income of over Rs 5 lakh — a number which is most difficult to believe as there are lakhs of small businesses with a fairly decent income.

The number of those who filed returns is much less than the number of people who have PAN. According to the government, nearly 4.86 crore individuals have PAN cards. However, only 47 per cent of them have filed income-tax returns, while 63 per cent have skipped it.

Minister of state for finance Jayant Sinha on Friday told the Lok Sabha that 50 per cent of the smaller firms are not paying taxes and the government has taken revolutionary steps to ensure there is no tax evasion.

After the criticising by famous French economist Thomas Piketty, the government has made public data related to taxpayers such as total number of taxpayers, income disclosed in returns by various categories of taxpayers and the number of PAN holders.

Mr Piketty had raised the debate on unequal wealth distribution in the world with his best-seller Capital in the Twenty-First Century. However, Mr Piketty was not impressed with the amount of data released on Friday. “They (India) released detailed data by income range for one year only (2012-2013).

For the entire period 2000-2015, the only data that was released is at the aggregate level, total numbers of taxpayers, total tax revenue, etc. In order to study the evolution of income distribution we would need to have the detailed data by income range for all years,” he said.