Tax Simplification Comes As A Welcome Boost; Swells Filing Of ITRs

India’s tax collection data (both personal and corporate) has come up with some interesting economic indicators. For instance, a comparison of disparity in income during AY15 and AY24 shows that there is a clear rightward shift in the income distribution curve signifying that people in lower income brackets are increasing their income to converge towards their share in population.The study shows that there has been a cumulative 74.2 per cent decline in income disparity coverage for those earning up to Rs. five lakh. This indicates that the Centre’s continuous efforts are reaching the bottom of pyramid due to which there has been an increase in income of the ‘lower income group’. Granular analysis of a recent study by the SBI Economic Research wing shows that the middle class has shifted from the income range of Rs. 1.5-five lakh in AY14 to Rs. 2.5-10lakh in AY24. Even the quantum of ‘crorepati’ taxpayers rose 5x to nearly 2.2 lakh in AY24 from 0.4 lakh in AY14.Declining income inequality mirroring upward transition of lower income people along with their income is also evident. Nearly 43.6 per cent individual ITR filers, belonging to the income group of less than Rs.four lakh in AY15 (FY14), have now shifted upwards.

That’s not all. Nearly 26.1 per cent of the gross income of lowest income group of lower than Rs. four lakh has also moved upwards in the intermittent period.Coupled with these, in another significant development, ITRs filed during AY24 witnessed a phenomenal jump, standing at close to 8.6 crore (against nearly 7.3 crore in AY22). Of them, 6.89 crore or 79 per cent of these returns were filed on or before the due date, the concomitant result in the share of returns filed after due date, with fine, thus declining from a high of 60 per cent in AY20 to a mere 21 per cent in AY24. As things stand, the total number of ITRs filing for AY25 could swell more than nine crore by end March’25 (7.3 crore ITRs have been filed by the due date) while inculcating more discipline amongst the filers.Interestingly, the top-5 states (Maharashtra, Uttar Pradesh, Gujarat, Rajasthan and Tamil Nadu) accounted for nearly 48 per cent of the total ITRs that were filed in AY24.

These states also accounted for the maximum increase in incremental number of ITRs filings witnessed during the intermittent period (AY24-AY15), driven in part by better employment opportunities being created, as also the migration efflux inter/intra geographical pockets.The set of data related to personal income tax and corporate tax also suggests other interesting things. The personal income tax (PIT) collections have been surpassing corporate tax collections since FY21. It’s share increased by six per cent, while corporate tax share rose by three per cent in last four years. Similarly, direct taxes to GDP ratio inched up to 6.64 per cent in AY24, highest since 2000-01, vindicating the results of improving tax compliance. Interestingly, direct tax buoyancy grew to 1.86 in 2023-24 from 1.25 in the previous financial year while cost of collection declined to 0.44 per cent in FY24 (0.51 per cent in FY23). One wonders if these statistics mean that tax simplification has given a long delayed fillip to ITR filing.