I-T collections will not fall in FY18: Arun Jaitley

The finance ministry is confident that income-tax (I-T) collections will not fall in 2017-18 year-on-year due to expected bump in the mop-up this year following black money disclosure scheme, unlike the pattern seen in the previous voluntary disclosure of income scheme (VDIS) of 1997-98.

The ministry believes that in VDIS, many assessees paid higher tax in advance in 1997-98, which they were to pay in 1998-99. This was so because VDIS levied I-T at 30 per cent and took decade-old prices of 1987 into consideration. As such, the effective tax rate came out to be close to a single digit. However, under this Income Declaration Scheme, the effective tax rate is 45 per cent, inclusive of tax, penalty and Krishi Kalyan Cess. As such, there is no reason to believe that assessees would pay tax in advance at higher rates this year when they can pay at 30 per cent next year.

When asked whether I-T collections would fall next year, Finance Minister Arun Jaitley said: “There is no reason to believe that this should happen. One of the reasons in that scheme (VDIS) was that the next year you had to pay at 30 per cent and the scheme was enabling you to declare at much less. So, people declared in advance, but here why should anybody pay at 45 per cent when the facility of 30 per cent is available next year?”

In 1997-98, I-T collections were budgeted at Rs 21,700 crore, but because of over Rs 9,500 tax collections from VDIS, the revised estimates for it shot up to Rs 28,750. The next year, the I-T collections were budgeted at Rs 20,930 crore. However, the revised estimates were at Rs 21,430 crore. In fact, the Budget Estimate (BE) of even 1999-00 was at Rs 26,910 crore, which was upscaled to Rs 26,684 crore, both of which were less than the revised estimates of 1997-98, when VDIS was introduced.

Tax experts see logic in Jaitley’s argument. Amit Maheshwari, partner of Ashok Maheshwary and Associates LLP, said: “Why will an honest tax person pay income tax at 45 per cent in advance?

It is only those who have black money paid out of fear of prosecution.”

Neeru Ahuja of Deloitte Haskins & Sells says although it is difficult to predict tax collection numbers for the next year due to dynamic economic parameters, there is no reason to believe that I-T collections would fall next year due to the black money scheme of this financial year. Also, if the goods and services tax (GST) is introduced, it would help boost I-T growth, she says.

This is because assessees would register themselves under GST because they would get input tax credit. This information would also be available with the income tax department due to advancement of technology, she said.

Besides, the bump produced in 1997-98 was much more compared to tax receipts projected that time than this time. So, next year might not see that much base effect. In 1997-98, Rs 9,729 crore came in as tax under VDIS, which constituted almost 45 per cent of the BE of that year. However, this time, tax would be Rs 29,362 crore. Of this, Rs 14,681 crore would come to the government by this year and the rest by September 30, 2017.

The amount that would come this year constitutes just four per cent of the BE at Rs 3.5 lakh crore. The first instalment of 25 per cent has to be paid by November 30 this year, another 25 per cent by March 2017, and 50 per cent by September 2017.

As many as 64,275 declarants disclosed their black money to the tune of Rs 65,250 crore. The number may increase as the tax department is still computing the figures. Refusing to compare IDS with VDIS, Jaitley said the average per declarant in the existing scheme was Rs 1 crore, while it was Rs 7 lakh in the latter.