During his budget speech on 1 February, 2017, the Finance Minister stated, "We can conclude we are largely a tax non-compliant society." In light of this assessment, I thought it would be worthwhile examining the tax compliance of candidates who contested in the recently concluded Assembly elections in five states. While filing their nomination papers, all candidates are required to furnish details of the income tax returns in the self-sworn affidavits (Form 26) submitted to the Election Commission of India.
We analysed affidavits of 7121 candidates who contested elections in the states of UP, Uttarakhand, Punjab, Goa and Manipur. Out of these 7121 candidates, 3702 (52%) did not file ITRs. While it is possible that some candidates out of the 52% may have incomes below ₹2.5 lakhs per annum, it's a little more difficult to explain why 2324 (32%) candidates who are crorepatis did not file their ITRs.
Out of 7121 candidates, 3702 (52%) did not file income tax returns... and 2324 (32%) candidates who are crorepatis did not file their ITRs.
The percentage of candidates who have not filed ITRs in UP was 58%, in Uttarakhand 44%, in Punjab 41%, in Manipur 48% and Goa 14%. The percentage of candidates who are crorepatis but have not declared ITRs in Goa was 3%, in Manipur 34%, in Punjab 9%, Uttarakhand 8% and UP 15%.
Candidates are required to submit details of PAN and status of filing of ITRs in Para 4 of Form 26. In Para7, candidates furnish details of assets to include movable and immovable property along with the current market value. In Para 4, where the candidate is required to show total income, there is no separate column for income from agriculture. As agricultural income is exempt from income tax unless it is mentioned separately from other sources of income, it becomes difficult to assess the real taxable income.
Our analysis of Form 26 data revealed some cases of huge assets but comparatively low income shown in ITRs.
Our analysis of Form 26 data revealed some cases of huge assets but comparatively low income shown in ITRs. There are some candidates who declare large holdings of agricultural land but show low income in the ITR. While there may be genuine reasons in some cases (like fallow land or land not under cultivation or low income due to drought etc), it's likely that a candidate having assets worth crores would be having a reasonably good income. Since there exists a grey area in the ITR details submitted in Form 26, ADR while listing out the high assets candidates, always states that some of the income maybe from agriculture and thus exempt from tax.
To sum up, there is a need to show income from agriculture and other sources separately in Form 26, so that a distinction can be made between taxable and non-taxable income. Candidates with income above ₹2.5 lakhs need to file details of ITRs in the Form 26. In addition, 10-15% of candidates did not submit their PAN details in Form 26, which is something that should be addressed.
It's time that netas lead by example so that we move towards becoming a "tax compliant society."