The Union government is seeking to widen the tax base, targeting a 12% increase in new filers this financial year, compared with 8% in FY22, an official document shows.

According to the Central Action Plan (CAP) for FY23 circulated internally by the Central Board of Direct Taxes (CBDT), the department also plans to expedite the processing of high-value income tax appeals under an unknown mechanism.

The CBDT has asked field officials to use data mining, data analysis, and input from market associations and trade bodies to identify non-filers and directed its systems committee to provide data on non-filers and those who stopped filing by September 30.

Growth in new filers peaked after demonetisation but fell sharply in the year before Covid-19. The growth rate of new filers was 17.7% in FY2017, 19.79% in FY2018, 17.58% in FY19, then decreased to 10.6% in FY20, 10.18% in FY21 and 10.18% in FY22; this fiscal year fell to 8%. However, the collection of direct taxes has been strong over the past two years, rising from Rs 9.45 trillion in FY21 to 49.02% to Rs 14.09 trillion in FY22. New filers were not included in the filer base at the beginning of the year but filed a return within a financial year.

The latest action plan focuses on reducing the need for delinquency and better litigation management. It talked about comprehensive processing of appeals of Rs 50 crore and above and set a target of processing 400 appeals per Income Tax Commissioner (Appeals) in FY23 and at least 100 appeals per quarter.

This is due to concerns that appeals under the anonymous system will be processed more slowly, creating uncertainty for taxpayers. The number of appeals to the department through the anonymous mechanism rose to 438,000 as of April 1, up from 398,000 last year. The plan also talks about processing at least 90% of appeals by March 31, 2017.

Delinquency demand raised by the tax department has grown by 25% in 2021-22 and is scheduled to decrease by 60% to Rs 7.3 trillion in the current financial year. The CBDT also sets out a timetable for providing various services to taxpayers. These include issuing refunds within three months of processing returns, making decisions on rectification applications within six months, issuing tax clearance certificates within one week, and early responses to appeals.

According to Finance Minister Nirmala Sitharaman, the number of taxpayers has risen to 91 million from 50 million a few years ago.

At the same time, the government implemented the Non-Filers Monitoring System (NMS), which collects and analyses inside information and transaction data from third parties to identify individuals/entities responsible for potentially large taxable financial transactions that have not been filed their returns.