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India’s direct tax collection is at its greatest level in 14 years, while income inequality has decreased by 74% since AY15

Arpita Kushwaha October 26, 2024 02:27 PM

According to recent research, the cumulative income disparity coverage for individuals in India making up to Rs 5 lakh has decreased by 74.2%, indicating that the government’s ongoing efforts are reaching the bottom of the pyramid and raising the income of those in the “lower income group.”

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According to a State Bank of India (SBI) economic department comparison of the income gap between assessment years (AY) 15 and 24, there is a noticeable shift to the right in India’s income distribution curve, indicating that those in lower income brackets are raising their incomes in order to catch up with their population share.

“As 43.6 percent of individual ITR filers, belonging to the income group of less than Rs 4 lakh in AY15 (FY14), have left the lowest income group and shifted upwards, it is evident that declining income inequality mirrors the upward transition of lower income people along with their income,” the research said.

According to the report, 26.1% of the lowest income group’s gross income, which is less than Rs 4 lakh, has increased over the same period.

From 23.3 in 2017-18 to 41.7 in 2023-24, female labor force participation is increasing, with the largest increases occurring in Jharkhand, Odisha, Uttarakhand, Bihar, and Gujarat.

Direct tax contributions to total tax revenue increased to 56.7% in AY24 (54.6%) in AY23, the highest level in 14 years, as a result of a growing alignment with the progressive taxation scheme.

According to the SBI analysis, since FY21, the growth rate of personal income tax (PIT) collections has surpassed that of corporate tax collections, rising by 6% compared to 3% for CIT.

The number of ITRs submitted in AY24 increased dramatically to 8.6 crore (compared to 7.3 crore in AY22). The proportion of returns submitted after the due date (with a fee) decreased from a high of 60% in AY20 to only 21% in AY24 as a consequence of 6.89 crore, or 79% of these returns, being filed on or before the due date.

As 7.3 crore ITRs were submitted before the deadline, the SBI report said, “We believe the total number of ITRs filing for AY25 could swell more than 9 crore by end March 2025 while inculcating more discipline among the filers.”