Disputed, unrealised tax a bane

The latest Union Budget reveals that tax demand raised but not realised due to disputes amounts to ₹13.36 lakh crore as of March 31, 2024.

- TV Mohandas Pai S Krishnan

Corporation tax under dispute is ₹8.06 lakh crore, of which about 80% is less than five years old, amounting to ₹6.44 lakh crore—an increase of 35% over the previous year. Meanwhile, income tax (I-T) under dispute is at ₹5.30 lakh crore.

Shockingly, unrealised tax demands that are not disputed amount to ₹15.23 lakh crore as of March 31, 2024. This has increased by about four times since FY21 and is surprisingly higher than taxes under dispute for the first time during this period. More than 60% of unrealised non-disputed tax demands relate to I-T (non-corporate), which has increased by about 5.8 times during this period to ₹9.32 lakh crore. This indicates tax terrorism against individuals and non-corporate entities. The prominent reasons for not realising tax revenue under the non-disputed category are inadequate asset or no assets for recovery, failure to trace taxpayers, and so on; however, the real reason is high-pitched tax demands without much substance.

The total tax revenue demand not realised (disputed and not disputed) has nearly doubled from ₹14.41 lakh crore in FY21 to about ₹28.59 lakh crore in FY24. If this amount was realised, the fiscal deficit (revised estimate) of ₹15.70 lakh crore for FY25 can be erased! The unrealised tax revenue every year is more than the tax revenue collected for that year. Corporation tax demand not realised stands at ₹13.97 lakh crore as of FY24, whereas actual corporation tax collected is at ₹9.11 lakh crore. Similarly, unrealised non-corporate tax demand is ₹14.62 lakh crore, whereas actual tax collected is ₹10.45 lakh crore for the same period.