Gap between PAN card holders and number of taxpayers

PAN has been allotted to around 17 crore entities while I-T returns have been filed by only 3.5 crore entities. The gap between PAN card holders and number of taxpayers is growing over time. While the number of PAN card holders increased by 175 per cent during FY2005-06 to FY20 10-11, the number of taxpayers in the same period rose only by 17 per cent. Of the total 12.11 crore PAN card holders during FY2010-1 1, the number of taxpayers stood only at 3.48 crore and has remained almost constant thereafter. To a significant extent, the difference reflects the use of PAN card as a proof of identity for various stipulated economic functions that have no relation to tax. Nevertheless, the gap must have a bearing on the efforts to widen the tax base as also the efficacy of the PAN card distribution system. A huge gap has also been noticed between the number of entities to whom tax deduction account number (TAN) has been allotted vis-à-vis number of deductors filing TDS returns/submissions. The reasons need to be comprehensively identified for such a widening gap and whether there is room to enhance the I-T base from the information thus obtained.

Vigorous efforts are required both in terms of policy and enforcement in widening the tax base, which as seen above is not commensurate with the growth in income over the years. The reasons for this include India’s huge rural and underground economies, which present severe logistical constraints with respect to collecting tax. There is a flourishing underground economy, where transactions are in cash and people simply pay no taxes. Further, tax collectors have failed to raise as much as they should from high-income sections of society – doctors, lawyers, designers – and other independent, self-employed professionals whose tax is not deducted at source. Even a large number of rich farmers, who earn more than salaried employees in the cities, get away with paying no tax at all in view of the government’s lack of will to consider an agricultural income tax.

Ultimately, TARC s consultations led to the conclusion that the tax system is not only complicated, confounding and contradictory, it is also affected by corruption, inefficiency and incompetence. Even ordinary taxpayers need to hire a tax consultant for tax payment, which costs them money, and, therefore, they become willing tax avoiders. Compliance systems should be made simple and user-friendly so that more people are encouraged to pay taxes, not avoid them.

Source-Third Report of the Tax Administration Reform Commission (TARC) (F. No. TARC/Report/36/2014-15 Dated 30.11.2014).

Compiled by CA Sandeep Kanoi

More Under Income Tax


  1. sadashiv Gaikwad says:

    Some of Persons obtained PAN for ID Proof, In some cases there are compulsory TDS so deductee get PAN.Many are below threshold limit.Some are farmers and senior citizen or housewives.

  2. BSKRAO says:

    In the year 1984, the provision of Audit of Accounts by only Chartered Accountants was introduced in the Income Tax Act. Thereafter every tax payer started appointing CA, instead of Tax Practitioner/Advocate etc. at original side of tax practice even for filing returns and representing them before taxation department. As a result many Advocates & Tax Practitioners had to leave this profession as they found it difficult to survive only on clients having small business and income. Moreover, since 2005 i.e. after the introduction of Value Added Tax Act in every State of India, the provision of Vat Audit by only Chartered Accountants has been introduced. This added fuel to burning issue of survival of Advocates & Tax Practitioners in the field of tax practice at original side. Therefore very few Non-CA Tax Professionals are entering taxation practice. Thus the monopoly of practice in taxation branches of law has been conferred on Chartered Accountants, even though all of them are not experts in the said practice.

  3. BSKRAO says:

    (1) Due to T.D.Venkat Rao case (SC) only Chartered Accountants will conduct Tax Audit in Income-Tax Act. In view of latest verdict in the case of Bar Council of India Vs A.K.Balaji (SC) excepting assessee, person regularly employed by assessee & legal practitioners, others require deletion from Section 288(2) of Income-Tax Act. In the result only CAs will conduct Tax Audit & only Legal Practitioners will act & plead before Income-Tax authorities. I think CBDT should examine ill effect of this situation to Govt. revenue, keeping in mind trouble faced by assesses to approach more than one Tax Professional for giving compliance under Income-Tax Act.

    (2) On date, assesses, Non-CA Tax Professionals & CAs should join hands to upload Tax Audit cases as per the software provided by vendors to avoid repetitive job of filling Tax Audit Report (Because common fields in Form No.3CA, 3CB & 3CD are automatically filled-up while filling ITR). It is also indicated in e-filing portal that in future, Cost Audit Report, Report under Central Excise & Service Tax has to be uploaded. Ie, in future following persons with pass word for their respective DSC should join hands to upload Tax Audit cases.

    (b)Non-CA Tax Professionals (DSC not required on date)
    (c)Chartered Accountant
    (d)Cost & Management Accountant
    (e)Auditor under Central Excise & Service Tax
    (f)State VAT Auditor-VAT Tax Practitioner (If added in future)

    (3) Situation mentioned in Para No.1 & 2 above may cause further strict hurdle for voluntary compliance in Income-Tax Act & other taxation laws. This being the position on date, how come Govt. will expect tax compliance from all PAN Holders ?

    (4) I think, Ministry of Finance, Ministry of Law, Ministry of Corporate Affairs & heads of all professional bodies in India should now sit together & resolve the issues prevailing on date to expand the genuine tax base of assesses in India.

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March 2021