Income tax collections are growing faster in smaller cities than in the metros. Collections from regions such as Bhubaneshwar, Lucknow, Hyderabad, Guwahati, Chandigarh and Jaipur grew at a much faster clip compared to Delhi and Mumbai over the last few years, mirroring larger income levels and greater opportunities in these places.
In the four years from 2005-06 to 2009-10, Bhubaneshwar region has topped the list in the country by registering a 146 per cent growth in collection of personal income tax (PIT). Close behind are Lucknow (145 per cent) and Hyderabad (134 per cent) regions.
The smaller base of collections in these towns is clearly one reason. At R1,563 crore, the personal income tax collections from Bhubaneshwar region are less than 5 per cent of Mumbai’s R32,070 crore or around 10 per cent of Delhi’s. According to analysts, if the base is lower, a marginal increase can reflect higher percentage in the growth.
But to discount this completely would be ignoring an emerging trend of India’s growth story trickling down. “This is a new trend which has emerged over a couple of years in which smaller regions are showing higher growth in revenue collection, rather than the metros,” a senior Central Board of Direct Taxes official told HT. “We’re studying this trend, which is due to wider tax net and better collection management.” he said.
“The metros have already been covered extensively and the new tax payers are coming in from the smaller cities or regions,” former director of ICRIER Rajiv Kumar said.
Growth in tax collection in a city is also due to the growth in per capita income of the state.
“Typically, growth in cities can’t be sustained for long unless the state also grows. The story of high growth of smaller cities in eastern and northern India has been on for the last five years at least, and this indicates that these states will continue on a high growth path for some time to come,” said Director, Indicus Analytics, Laveesh Bhandari.