In the fiscal year 2023-24, only 6.68% of India’s population filed income tax returns, according to recent data shared by the Minister of State for Finance, Pankaj Chaudhary, in the Rajya Sabha. This statistic provides a fascinating glimpse into the income distribution and tax compliance landscape of the world’s most populous country. Let’s delve deeper into the salary-wise breakup of Indian taxpayers who filed their returns in FY24.
The Big Picture: Overall ITR Filing Trends
Before we break down the salary slabs, it’s important to note that the total number of income tax returns (ITRs) filed in FY24 reached an impressive 8.09 crore (80.9 million). This marks a significant increase from the previous fiscal year, reflecting growing tax compliance and economic activity in India.
Salary-wise Breakdown of ITR Filers
The Middle-Income Majority: 5 LPA to 10 LPA
The largest group of income tax filers falls within the salary range of 5 LPA (Lakhs Per Annum) to 10 LPA, with 12.8 million individuals. This segment represents the burgeoning middle class in India, comprising young professionals, mid-level managers, and skilled workers across various sectors.
Rising Professionals: 10 LPA to 15 LPA
The next significant group consists of 5 million taxpayers earning between 10 LPA and 15 LPA. This bracket likely includes experienced professionals, senior-level employees, and successful small business owners.
Upper Middle Class: 15 LPA to 20 LPA
Moving up the income ladder, we find 1.9 million individuals in the 15 LPA to 20 LPA range. This group represents the upper middle class, often including senior managers, specialised professionals, and entrepreneurs.
High Earners: 20 LPA to 25 LPA
The high-income bracket of 20 LPA to 25 LPA comprises 0.9 million taxpayers. These individuals are likely to be in leadership positions, highly skilled professionals, or successful business owners.
Top Earners: 25 LPA to 50 LPA
At the upper end of the spectrum, 1.3 million individuals reported incomes between 25 LPA and 50 LPA. This group represents the top earners in the country, including C-suite executives, top-tier professionals, and successful entrepreneurs.
Implications and Insights
Growing Middle Class
The substantial number of taxpayers in the 5-15 LPA range indicates a robust and growing middle class in India. This segment is crucial for economic growth and consumption-driven sectors.
Income Inequality
The stark difference in numbers between the lower and higher income brackets highlights the income inequality that persists in the Indian economy. While millions file returns in the 5-10 LPA range, the numbers taper off significantly in higher brackets.
Potential for Increased Tax Base
With only 6.68% of the population filing ITRs, there’s significant potential to broaden the tax base. The government and tax authorities may focus on bringing more individuals into the tax net, especially those in the informal sector.
Economic Indicators
The salary-wise breakup serves as an important economic indicator, reflecting job market trends, sectoral growth, and overall economic health.
Challenges and Opportunities
Simplifying Tax Compliance
To encourage more people to file returns, especially in lower-income brackets, simplifying the tax filing process is crucial. The new tax regime introduced by the government aims to address this.
Digital Push
The Income Tax Department’s digital initiatives, including pre-filled ITR forms and the e-filing portal, have made it easier for individuals to file their returns. Continued focus on digital solutions can further improve compliance rates.
Financial Literacy
Enhancing financial literacy, particularly about tax obligations and benefits, can help increase the number of tax filers across all income brackets.
Addressing the Informal Sector
A significant portion of India’s workforce operates in the informal sector. Finding ways to bring this segment into the formal economy and tax system remains a challenge and an opportunity.
The salary-wise breakup of income tax filers in India for FY24 provides valuable insights into the country’s economic structure and tax compliance landscape. While the growing numbers indicate positive trends in tax filing, there’s still substantial room for expanding the tax base. As India continues its economic growth trajectory, monitoring these trends will be crucial for policymakers, businesses, and economists alike.
By focusing on simplification, digitalisation, and financial education, India can work towards a more inclusive and compliant tax system, reflecting its status as one of the world’s fastest-growing major economies.
