ITRs filed in AY23 even fewer than in Covid pandemic years, shows data

There is a decline despite the last-minute filing frenzy

This report has been updated to include a clarification by the Central Board of Direct Taxes (CBDT). Only 58.3 million income-tax returns (ITRs) were filed for the assessment year 2022-23 (AY23) as on July 31 this year —the last date for filing the returns. This is much lower than the 71.4 million returns filed in AY22, and also less than the number for each of the previous three years, including pre-pandemic AY19, which witnessed 65.3 million returns.

The assessment year broadly corresponds to income earned in the previous financial year. Thus, AY23 is the assessment year for income earned during the financial year 2021-22 (FY22). There has generally been a rising trend in the number of returns filed. This largely persisted even during the pandemic, at least relative to the time before the Covid-19 outbreak.

The number of returns filed rose from 65.3 million in AY19 to 72.6 million in AY20. This dropped the next year before rising again to 71.4 million in AY22. The number of income tax returns (ITRs) filed thus far for AY23 is lower; the deadline of July 31 was not extended this year unlike during the pandemic-affected years. There were fewer than 20,000 daily Covid-19 cases around the time of the deadline. The peak has been over 400,000 cases, seen in May 2021.

“The initial pace of e-filing was much slower, with the first 10 million ITRs for AY 22-23 being filed only by July 7, 2022. The pace picked up marginally, with about 24.8 million ITRs being filed by July 22, 2022. With the government announcing that there would be no extension of the deadline, there was a surge in the filing of ITRs and by July 25, 30 million ITRs had been filed… The surge of filing ITRs peaked on July 31, 2022 (due date for salaried taxpayers and other non-tax audit cases), with over 7.24 million ITRs being filed on a single day,” said a government release on Monday.

There is a fine of up to Rs 5,000 for any delayed returns filed until December 31.

But tax collections, on the other hand, show a rising trend. Collections are measured as a percentage of gross domestic product (GDP) to account for differences in economic size at different points in time. The direct-tax-to-GDP ratio was 6.1 per cent in 2021-22. This was the highest since 2007-08, when it had touched 6.3 per cent. The indirect-tax-to-GDP ratio was 5.6 per cent and matched the 2016-17 figure.

Non-tax revenues have seen less robust growth, according to a July 24 report titled ‘Domestic Demand Remains Healthy’, from global financial services group Morgan Stanley, authored by chief India economist Upasana Chachra and economist Bani Gambhir.

“The government has budgeted the fiscal deficit to decrease to 6.4 per cent of GDP in FY23 from 6.7 per cent of GDP in FY22 (actual). On an FYTD basis, total expenditure growth is tracking at 22.6 per cent, with capital spending higher than revenue spending. Total receipts are weak at 7.6 per cent, driven by lower non-tax revenues even as tax revenues are healthy,” it said.
A clarification
 
The Central Board of Direct Taxes (CBDT) on Thursday clarified that this report was based on an inappropriate comparison. The figures for previous years included all categories of returns, while those for AY 2022-23 were only for the non-audited category of returns. We stand corrected.
 
In response to the report, the CBDT stated: "The figures that have been quoted for each Assessment Year actually pertain to the total number of ITRs filed during the Financial Year till the end of the Financial Year and include ITRs pertaining to various categories of cases."
 
The last date for filing the ITR for AY23 for individuals that do not need an audit was fixed as July 31, 2022. The government did not extend the deadline. Also, the ITRs for other categories are yet to be filed.
 
The department also sent the figures related to the number of ITRs filed since FY19.
 

 
"It may be noted from the table above that ITRs at S. no.s 1 to 4 of the table are the total number of ITRs filed for the respective assessment years till the due date, including extended due date, which in many cases has spilled over to the following financial year," the clarification read.
 
The figure of 58.6 million does not include the ITRs filed under other categories. It remains to be seen whether the final figures for AY 2022-23 including all categories of returns, to be released later in the current financial year, are higher than those in the previous years.