Only 1% Indians pay tax
According to the government data on direct tax, released after a gap of 15 years, only 1% Indians or 1.25 crore people paid income tax in the assessment year 2012-13. The data shows that 2.87 crore people in India file Income tax returns, however, 1.62 crore did not pay any tax. 5,430 individuals paid an income tax of more than Rs.1 crore during FY2011-12.
India used to publish the 'All India Income Tax Statistics' till the year 2000 when it was discontinued.
French economist and the author of the best-seller, 'Capital in the twenty-first century', Thomas Piketty, sparred with Chief Economic Advisor, Arvind Subramaniam during a panel discussion at the Jaipur Literary Festival in January 2016. Piketty complained of the government not releasing the tax statistics which is essential for transparency. Arvind Subramanian assured him that the present government would fix this and release the data.
The government released tax data for the fiscal years 2001-2015, which the Prime Minister hailed as a "landmark decision". Chief Economic Advisor Arvind Subramanian, tagged Thomas Piketty on twitter after the data was released. However, Piketty responded that the data was released at an aggregate level (total number of taxpayers, tax revenue, etc.) and detailed data was available for FY 2011-12 only.
According to the data, while the total income tax collection has increased 9-fold to Rs.2.86 lakh crore in 2015-16 from Rs.31,764 crore in 2000-01, the corporate tax has increased 12-fold to 4.54 lakh crores.
Maharashtra with 40% of the total collection, is the biggest income tax (IT) contributor, 3 times more than Delhi (13%), which is the 2nd largest contributor. The 2 states were followed by Karnataka, Tamil Nadu and Gujarat.
The data shows that the ratio of direct tax as a share of GDP has declined to 5.47% in 2015-16 and the direct tax to indirect tax ratio is lowest in 9 years. The growth in direct tax has also come down from over 35% in 2007-08 to mere 6.7% in 2015-16. During FY2011-12, most of the taxpayers earned between Rs.5.5-9.5 lakh of income.
Compared to India, where 1% pay income tax, 45% of Americans and 10% of South Africans pay income tax. This implies that the tax base of India is very narrow.