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Saturday, 16 February 2013 00:00
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Identifying 1.2mn potential taxpayers long overdue


For years, the taxman has been collecting information about what people are buying, to see if tax evasion is taking place. So, if you buy a property, the taxman gets to know; if you buy a car, the matter gets reported back; ditto for jewellery, for credit card payments … you name it, and the taxman gets the information. So, it always came as a surprise when, despite all this, India just had 14.6 lakh persons declaring a taxable income of more than R10 lakh considering that 16 lakh persons made credit card payments of more than R2 lakh in FY13 and that 52.4 lakh persons spent more than R2 lakh buying mutual funds in FY13.

So, it is a good thing that the taxman is finally using the Tax Information Network (TIN) to track down potential taxpayers. While a total of 4.7 crore information records have been scrutinised to generate a list of 1.2 million potential non-filers, letters have just been sent out to 35,000 persons. Over a period of time, the rest in the list will be asked to furnish explanations.

While the finance minister appears to have set his eyes on putting a surcharge on the incomes of the rich—those with a taxable salary of R50 lakh per annum—as FE columnist Surjit Bhalla has pointed out, the real cream is to be got by taxing the “missing middle”, or middle class taxpayers who understate their incomes. According to Bhalla’s calculations, while compliance rates are a healthy 65% among the rich, this is just 10% in the case of those earning between R5 lakh and R10 lakh a year. Going by this, just increasing the compliance in the middle classes by 3 percentage points—from 10% to 13%—will yield the finance minister R5,250 crore as compared to R2,600 crore from a 3 percentage point surcharge on the rich (those earning above R20 lakh per annum). If the TIN starts delivering, this could be the beginning of getting the missing middle.


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