HYDERABAD: Income tax filings, which were consistently growing till last year have started showing signs of decline as per the latest data. The tax e-filings declined in the financial year (FY)18-19 to 66.8 million from 67.5 million in FY17-18. According to economic experts, if the trend continues, it might disturb the country's fiscal math, which is already in distress.
FY18-19's decline comes amid high growth witnessed post-demonetisation and GST rollout when the tax filings grew at an enviable 43 per cent in FY15-16, and 22 and 28 per cent in FY16-17 and FY17-18 respectively. Similarly, growth in registered filers which grew 21 per cent in FY15-16, dropped to 15 per cent in FY18-19.
"It does beg the question whether compliance was weaker in the latter part of FY18-19 given that the number of registered filers continued to see steady growth. If compliance has been weak, the new government will aim at increasing the filings and collections in FY19-20," noted Suvodeep Rakshit, Analyst, Kotak Economic Research.
The good news though is that the contribution of high-income tax filers is steadily rising. For instance, the share of filers with an annual taxable income of less than Rs 5 lakh fell to 76.2 per cent in FY19 from 86.2 per cent in FY12, while those in the income bracket of Rs 5-10 lakh account for 16.4 per cent up from 8.5 per cent during the same period.
Income tax filings growth comes to a halt with fall in indirect tax revenue, with revenue buoyancy falling behind budget estimates. Declining tax revenue is what the government would like to avoid at all costs to not upset the economic applecart. Any additional stress on fiscal space -- where if the government and PSU borrowings rise -- will burden debt markets and may likely keep the yield curve steep in FY20.