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Only 76,000 assesses in high income tax bracket

P Vaidyanathan Iyer

The number of high income group individuals with earnings of over Rs 1 million a year has grown by a whopping 32 per cent in 2001-02.

Ironically though, there are just about 76,000 such individuals (including Hindu Undivided Families) in a country which has a population of over one billion.

If income tax returns filed in 2001-02 are any indication, the number of high income individuals and HUFs has increased by over 18,000 to 76,140 as on January-end this year compared to 57,832 as on March 31, 2001.

In the previous five years between 1996 and 2001, the compounded annual average growth rate has been about 24 per cent.

According to data compiled by the finance ministry, there are only 1.23 million people who report annual income of over Rs 200,000 in India. The total number of income tax assessees itself in January 2002 stood at 28.2 million or under 3 per cent of the country's population.

In fact, the revenue department's assessment of the income profile of the tax assessees in India is quite revealing.

The information, which was put together just ahead of the Budget for the current fiscal, shows that less than 2 per cent of the assessees (1.71 per cent to be precise) fall in the Rs 500,000-plus annual income category.

And in the Rs 500,000 to one million a year income bracket, there are just over 400,000 people (or 1.44 per cent of the tax assessees).

Experts pointed out that the number of people taxed at an annual income of Rs 1 million and above was highly incongruous given the fact that the yearly sales of luxury cars alone have been over 72,000.

Revenue department officials claim that while a thin minority has made the maximum noise on the withdrawal of Section 88 benefits, there is a silent and vast majority which does not have much to complain.

Only 4 million people or 12.64 per cent of the assessee base fall under the Rs 150,000 to Rs 500,000 a year income bracket, where the Section 88 tax benefit has been scaled down to 10 per cent tax from the earlier 20 per cent.

Officials have estimated that the department would gain in tax revenues to the tune of Rs 24 billion due to the removal of the exemption in the over Rs 500,000 category and the partial removal of the Section 88 benefit in the Rs 150,000-500,000 category. Independent assessments, however, suggest this is a very conservative estimate.

They point out that the government can easily net over Rs 50 billion every year with the withdrawal of the tax exemption.

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