No-tax liability claims grow despite robust rise in income
NEW DELHI : The number of persons reporting zero-tax liability for their previous year’s income continued to climb, with 44.6 million tax returns, or two-thirds of all 2021-22 assessment year filings, making this claim, according to data available from the income tax department. This represents a 4% increase in zero-tax returns filed in 2021-22 from the previous assessment year, despite the overall income of individuals and businesses growing by more than 14% in the tax returns filed in 2021-22, according to official data from the tax department.
While the overall trend of increased tax return filings signals a broadened tax base and improved compliance, the rise in returns claiming zero-tax liability raises concerns about the depth of this expansion. Only 22.9 million tax returns showed any actual tax outgo in the assessment year 2021-22 for income earned in the previous year, a tiny share of India’s 1.4 billion population.
A large number of those filing returns either claim no tax liability or receive their entire tax outgo refunded, reducing the number of those who actually contribute to the exchequer. To be sure, the number of tax return filers does not take into account people whose taxes have been deducted at source, for example, by employers, but are yet to file their tax returns.
Official data showed that the number of tax returns with no tax payable went up from 28.9 million in the assessment (return filing) year 2019-20 to 43 million in 2020-21 and then to 44.6 million in the assessment year 2021-22. That is despite the total reported income after various deductions and benefits have gone up from ₹51.72 trillion in the assessment year 2019-20 to ₹54.24 in 2020-21 tax returns and subsequently to ₹62.34 trillion
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