Taxpayer base soars, but return filings lag

tion, although it is not known what share of TDS collection is from those who did not file returns or their tax liability.

- 

Greater TDS coverage indicates greater oversight of economic activity, which enables the Income Tax department to prefill tax returns based on transactions it is aware of, inform tax payers about TDS deducted transactions so that they do not miss out any income while filing returns, and run campaigns by reaching out to assesses for greater voluntary compliance. Return filing is essential for claiming tax refunds.

Reasons behind the increasing gap

Riaz Thingna, partner at Grant Thornton Bharat LLP, said the trend reflects the government’s success in leveraging digitization and advanced compliance tools. According to Thingna, tax being deducted at source may make some taxpayers feel that their taxes are paid and compliance obligation is over.

Also, nonresidents covered by certain provisions in the Income Tax Act are exempt from filing, subject to conditions. Some tax payers who miss the original deadline subsequently file belated returns, explained Thingna.