New Delhi: A comprehensive assessment of India’s income tax records spanning FY11 to FY22 reveals a captivating upward trajectory. This financial evolution is rooted in the flourishing Indian middle-income segment and a significant reduction in zero-tax liability returns, painting a dynamic portrait of the country’s fiscal scenario.

The ascend of India’s middle-income class

This shift is evident in an insightful SBI Research report, projecting a remarkable surge in India’s per capita income. Forecasts indicate a climb from the current Rs 2 lakh in FY23 to an impressive Rs 14.9 lakh by FY47. This substantial growth mirrors the rise of India’s middle-income class, reflecting noteworthy advancements in the nation’s financial landscape.

Transforming taxpayer dynamics

The report also highlights a pivotal transformation in India’s taxpayer demographics. Predictions suggest that 25% of income tax filers will transition from the lowest income bracket by FY47, a significant jump from the 13.6% observed between AY12 and AY23. This migration underscores a burgeoning economic landscape and promising avenues for development.

A consistently rising trend in tax filings

The SBI Research report showcases an encouraging trend in tax compliance. The total count of income tax returns filed during AY23 surged to an impressive 78 million, marking a substantial increase from the 73 million reported in AY22.

Moreover, the proportion of returns filed after the due date witnessed a notable decline, decreasing from 60% in AY20 to a mere 25% in AY23. The report anticipates a potential further drop to around 20% in FY24.

Decline in zero-tax liability filers

One of the most significant shifts highlighted is the decline in zero-tax liability filers, individuals with taxable incomes below government-defined thresholds. The report indicates a noteworthy decrease in their share of total filed returns, declining from 84.1% in AY12 to 64% in AY23.

This, combined with the surging tax filing numbers, presents a strategic opportunity for policymakers to craft innovative measures aligned with India’s growing economic prospects.

State-wise performance: Exploring the foundation of Indian Tax filing

Delving into state-specific performance, Maharashtra, Uttar Pradesh, Gujarat, Rajasthan, and West Bengal emerged as the top five states in terms of ITRs filed in AY23. The report elucidates that AY23 witnessed an impressive uptick of 64 lakh ITRs compared to AY22, led by Maharashtra, followed by Uttar Pradesh, Punjab, Gujarat, and Rajasthan.

As India continues its upward trajectory in income tax trends, these insights offer a valuable lens through which policymakers can shape strategic measures to harness the nation’s economic potential.