Presumptive Tax Schemes for Resident Indians Provisional Changes and Growth in outreach

Abstract

Presumptive taxation in India was launched in 1994 after the Chelliah Committee's proposals, with the aim of facilitating voluntary estimation of income and return filing by small traders. The system has been subject to numerous changes since its launch, with the addition of a new section for retail traders, which was subsequently merged with the existing provision for businessmen and become inoperative from the assessment year 2011-12. Later, under the Finance Act of 20106, a new section was brought in to include professionals under presumptive taxation and enhance the scope. A review of budget documents over the years indicates that all such amendments and revisions have been aimed at streamlining the system for easy-going, widening the tax base, enhancing numbers of taxpayers, and curbing tax avoidance and evasion. In order to evaluate the degree to which these goals have been met, the study quantifies outreach of presumptive taxes by secondary sources like CBDT press releases, annual budget documents, and newspaper clippings. A study of the annual growth rate (AGR) of presumptive tax outreach shows that every amendment has caused an instantaneous positive push to the targeted taxpayers. But the trend line of AGR shows a slowing path, that of a steady decline in the rate of growth in outreach of presumptive taxation. This is also supported by the Compound Annual Growth Rate (CAGR), which reflects a substantiul drop in long-term momentum of growth. However, the continuity of consistent yearly rises points to the continued efficacy of suceessive amendments, showing that adjustments to the presuinptive taxation regime keep on producing bencficial results by expanding the taxpayer base and affirming the character of the system as a genuine Sugan (simplified) system of taxation.