Over 80 lakh taxpayers have not filed tax returns following the 2016 demonetization despite the government stating a surge in tax compliance in India.
According to The Indian Express there is a massive spike in the number of ‘stop filers’ in the 2016-17, reversing a four-year trend. Stop filers are people who filed for returns in the previous years but failed to do so in the current year despite being eligible. The report says that the number of stop filers was consistently falling from 37.54 lakh in fiscal 2013 to 27.02 lakh in fiscal 2014, 16.32 lakh in fiscal 2015 and 8.56 lakh in 2016.
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Officials attribute the increase to loss of jobs or drop in income due to fall in economic activity following demonetization of Rs 500 and Rs 1,000 notes, which added to almost 86 per cent of the total currency in value terms. The note ban remains a contentious issue since the GDP data for 2016-17, which was initially estimated at 7.1 per cent, was revised to 8.2 per cent in January end 2019.
An official said the number of stop filers reflect a compliance and enforcement gap, which the tax administration fails to enforce. “But this huge increase in stop filers for 2016-17 cannot be attributed to sudden changes in compliance behaviour. The spike could be due to a fall in income or loss of jobs during the year”, said the official.
The tax data of 2016-17 also shows a significant decline of more than 33 lakh TDS (tax deducted at source) who did not file returns in the past. It may imply that persons, who undertook some specified transactions in previous year, did not undertake it during the year in question, pointing to a fall in economic activity.