‘Income-Tax Day’ has its origin on 24th July, 1860, when Income-tax was first introduced in India by Sir James Wilson with a view to meet losses sustained by the British Government on account of the mutiny of 1857.
Evolution of Income-tax in India
The evolution of income-tax law and administration in India can provide several meaningful insights for any one engaged in the study of global taxation. 50 years ago in 1973-74, when the income-tax peak rate was an unbelievable 97.75%, India’s direct tax collection was a puny Rs. 790 crores. Over the next 25 years scaling down of tax rates witnessed higher tax collections via better compliance and when the peak rate was scaled down to 30% in 2008-09, direct tax collection escalated to Rs.3,65,000 crores.
Focus on IT for IT
The focus on IT (Information Technology) for IT (Income Tax) in the new millennium ushered a real turn-around in India’s taxing history. The ease of online tax payment and filing of digital returns during the past decade has paved the way for a more seamless tax compliance experience for taxpayers. With E-Filing and Processing of over 7 crore Income-tax Returns annually, the average time taken for issuing tax refunds in 2022-23 was just 16 days.
FAS and AIS – Biggest Game Changers
Since 2020, for both the Tax Department, as also the common taxpayers, the biggest game changers have been the Faceless Assessment Scheme (FAS) and the Annual Information Statement (AIS). Barring a few aberrations, FAS has proved to be a big boon, not only saving time and cost but also assuring elimination of mischief and unhealthy practices. AIS has significantly facilitated transparency, ease of filing correct tax returns and claiming accurate tax credits. From a practical parlance, FAS and AIS have truly changed the mindset of stakeholders, resulting in a never-before-seen win-win, clearly resulting in improved voluntary tax compliance on one hand and noteworthy rise in revenue collection.
Growth statistics within a timeframe of just 3 years speak volumes. Just compare, Direct Tax Collection of Rs. 9,45,000 crores in 2020-21 with the Budgeted Direct Tax Revenue of Rs. 18,23,000 crores in 2023-24.
Roadmap for the Future
Increased reliance on Artificial Intelligence and Data Analytics for widening the tax-net and trapping tax evaders, along with non-intrusive trust-based approach appears to be the hallmark of the Taxman’s roadmap in the years ahead! More effective Grievance Redressal can go a long way to further foster the right environment for healthier organic tax compliance!
