By Avinash Pandey
The Union Budget 2018-19 states that 16% of the government revenue comes from personal income tax. In his budget speech, Finance Minister Arun Jaitley mentioned that there has been a huge increase in the number of returns filed by taxpayers. In the financial year 2016-17, 85.51 lakhs new taxpayers filed their returns of income as against 66.26 lakhs in the immediately preceding year, he stated. He also put forward that at the end of the financial year 2016-17, the effective taxpayer base stood at 8.27 crore. Although this is a progress, the nation still lags behind in having all the citizens pay their share of income tax.
Direct taxes are crucial for any economy as they are a progressive form of taxation and play a very important role in government revenue. Hence, efforts must be put to find new and foolproof ways to increase the taxpayer base of the nation. One such method can be to focus on students (youth), and professionals, who are regulated by a national level body. The reason is simple. Their presence can be identified and their income-trail can be traced. This will help in increasing the tax base but also in increasing revenue collection. The detailed proposition is as explained.
Targeting the students of India
“The Educational Statistics at a Glance 2014-15“ released by the Union Ministry of Human Resource Development shows that there are 2.35 crore students enrolled at the level of senior secondary education (XI-XII) and 3.42 crore students enrolled in higher education. The All India Survey on Higher Education 2015-16, also released by the Union Ministry of Human Resource Development shows that out of the total enrolment of 3.42 crore students in higher education, 79.3% are enrolled in undergraduate level, 11.3% are at a post-graduate level and the rest are at various other professional levels. Thus, the number of target students are 5.8 crores (2.35 crore + 3.45 crore), the count of which is expected to be approximately 9 to 10 crores by 2021, depending upon the enrolments in senior secondary and higher education levels.
The Government of India should try to inculcate the concept of filing annual income-tax returns in each student studying in India right from the level of senior secondary education. This will increase the tax base by a whopping 5.8 crore once they start earning or once they reach the age of majority. This comes to an addition of 70% people in the tax base. To achieve this, in the two years of their senior secondary education, the students must be trained to file returns by adopting the hand-holding approach. This approach may be extended to the first year of their undergraduate program as well. From here onwards, the students can file in their returns annually by themselves. No additional infrastructure is required in schools to initiate such a measure.
The advantages of targeting the students are manifold. Not only will it improve the financial literacy of the youth but it will also have a spillover effect in the society. The students will spread the initiative to their family, friends and neighbourhood. This will increase the tax base and though the revenue generated in the initial years might be minimal, it will provide a trail of income in the long run. It will also develop a culture of financial involvement and transparent reporting. Finally, by involving big data analytics, it will help the government in assessing the nature and quality of jobs performed by students after completing their formal education. This will provide an aid to a data-centric and evidence-based formulation, monitoring and assessment of policies.
The youth will undoubtedly not resent this as, in the words of Finance Minister in his Budget speech,Our people, especially our youths, are curious to lead their lives honestly.
Targeting professionals through their all-India forums
It is common knowledge that professionals, who earn in discrete amounts do not disclose their actual income to the authorities. Their earning may be in lakhs, however, they do not disclose their income to avoid losing their money to tax. The Government of India, in cooperation with forums like Bar Council of India, Medical Council of India and trade unions, must ensure that each of their members is mandatorily asked to file their annual income-tax return. This would ensure that there is a proper record of income (self-declared) which can be utilised to check if the property and wealth generated by them over time are lawful or disproportionate.
The Union Budget 2018-19 shows that salaried employees are understandably stressed as professionals refrain from recording their income. As spoken during the budget session, For the assessment year 2016-17, salaried individuals have filed their returns which works out to an average tax payment of 76,306/- per individual salaried taxpayer, as against the individual business taxpayers including professionals who paid an average tax payment of 25,753/- per individual business taxpayer.
This clearly shows that the unsalaried individual professionals are impeding the development process and hindering the goal of socio-economic justice by not paying their taxes. All efforts must be undertaken to remove this impediment by bringing them in the tax net.
Importance of tax payment
India is passing through a phase of the demographic dividend. 27.5% of the youth are in the age group of 15-29 years and 34.8% are in the age-group of 15-34 years (Census 2011). The development of the nation cannot be equitable, sustainable and inclusive without their participation. They must shoulder their responsibilities in developing a culture of a transparent financial system.
Filing the income-tax returns to declare the correct and true incomes and also pay taxes as per the law is crucial for the development of the nation and welfare of the citizens. The government must take measures in mission mode to ensure that the tax base has an adequate representation of the society.
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