The Income Tax Department of India has recently released a comprehensive report on the Time Series Data of Direct Taxes and Income Tax Return Statistics. This data reveals a remarkable surge in taxpayer compliance and a significant increase in direct tax collections over the past few years. The insights provided in this report shed light on the evolving landscape of taxation in India, highlighting both the growth in the number of taxpayers and the expansion of income across various segments of the population.
Over the last decade, India has witnessed a substantial increase in the number of Income Tax Returns (ITRs) filed by individual taxpayers. In the Assessment Year (AY) 2013-14, the nation recorded 3.36 crore ITR filings. Fast forward to AY 2021-22, and this number had surged to an impressive 6.37 crore, marking a 90% increase over the course of a decade. The positive trend continues with AY 2023-24, which has seen an even more substantial increase, with 7.41 crore ITRs filed, including 53 lakh new first-time filers. This surge demonstrates the notable expansion of the taxpayer base, primarily driven by various reform measures introduced by the Department to simplify the tax process.
The increase in individual taxpayer compliance is not limited to one specific income range but extends across various brackets of gross total income. In the income range up to ₹5 lakh, the number of returns filed by individual taxpayers increased from 2.62 crore in AY 2013-14 to 3.47 crore in AY 2021-22, indicating a significant 32% growth. This range of income includes individuals with incomes below the taxable limit who may not have been filing returns previously.
Further analysis of the data reveals substantial increases in ITRs filed by individual taxpayers with gross total income in the ranges of Rs. 5 lakh to ₹10 lakh and ₹10 lakh to ₹25 lakh, growing by 295% and 291%, respectively, from AY 2013-14 to AY 2021-22. This suggests a positive trend in individual taxpayers’ movement towards higher income brackets, reflecting growing prosperity among India’s middle class.
The data reveals important findings when examining the distribution of income among individual taxpayers in AY 2013-14 and AY 2021-22. The proportionate contribution of gross total income from the top 1% of individual taxpayers, compared to all individual taxpayers, decreased from 15.9% in AY 2013-14 to 14.6% in AY 2021-22. This indicates a more balanced income distribution, with a slight decrease in the concentration of income among the top earners.
Conversely, the proportionate contribution of gross total income from the bottom 25% of individual taxpayers increased from 8.3% in AY 2013-14 to 8.4% in AY 2021-22, reflecting improved income distribution and financial inclusivity. The middle 74% group of individual taxpayers also saw an increase in their proportion of gross total income, rising from 75.8% to 77% during the same period. These trends underline a growing middle-class segment and the positive impact on income distribution in the country.
The report also highlights the overall increase in the average gross total income for individual taxpayers. This reflects a rise in economic prosperity across various income groups, indicating a healthier and more prosperous population. The average gross total income has seen an overall increase of 56%, surging from around ₹4.5 lakh in AY 2013-14 to approximately ₹7 lakh in AY 2021-22. This signifies that, on average, individual taxpayers are earning significantly more income, contributing to their improved financial well-being.
When we delve into the specific income groups, the data reveals intriguing insights. The average gross total income for the top 1% of individual taxpayers increased by 42%, while for the bottom 25% of individual taxpayers, it was an impressive 58%. These statistics underscore robust income growth among individuals across different income groups since AY 2013-14, culminating in a substantial rise in net direct tax collections.
The surge in taxpayer compliance, coupled with the growth in income levels among various segments of the population, has translated into a significant increase in net direct tax collections. These collections have surged from ₹6.38 lakh crore in the financial year 2013-14 to an impressive ₹16.61 lakh crore in the financial year 2022-23. This remarkable progress can be attributed to the government’s taxpayer-friendly and progressive policies, aimed at ensuring transparency, efficiency, and trust-building efforts with taxpayers and stakeholders.