July 21 More of the rich are now beginning to file income-tax returns. There has been a sharp rise in the number of assessees who filed return of income between Rs 1 crore and Rs 5 crore a year during the last three financial years.
During 2006-07, the number of assessees who filed return of income in this range (Rs 1-5 crore) was 15,743. This increased to 22,341 in 2007-08 and to 26,275 in 2008-09, the Rajya Sabha was informed today.
Tax experts say the main factor behind the surge in the number of income-tax assessees in this category is the economic growth since 2003-04.
Except for 2008-09, when the economy was hit by global economic downturn, the years prior to that saw steady GDP growth rates of 8-9 per cent. More wealth was created and, therefore, led to higher incomes, a tax partner in a law firm said.
While the economic growth aided wealth creation, the rationalisation of tax structure since 1991 paid handsome dividends both for the Government and the assessee during the period of strong capital formation.
Also, the increase in risk involved in tax evasion in the recent years, mainly on account of third-party information through annual information returns (AIRs), led to AN improvement in compliance of tax laws, a revenue department official said. The compliance burden was also eased by allowing assessees to opt for e-filing of returns and electronic payment of taxes. The tax department had resorted to computer aided scrutiny selection (CASS) techniques to identify scrutiny cases. The direct tax collections have seen a tremendous buoyancy in recent years, thanks to strong economic growth and improved tax compliance. In 2009-10, the Government expects to garner about Rs 3.7 lakh crore from direct taxes.
Meanwhile, the Income-Tax Department has initiated investigations in a slew of cases where insurance policies have been purchased through large cash payments. The investigations have been taken up to ensure that undisclosed investments are brought to tax, according to the income-tax law.