SBI Study reveals 74.2% decline in income disparity since FY14

A recent report by the State Bank of India ( SBI ) has highlighted a significant reduction in income disparity for individuals earning up to Rs 5 lakh annually, with a cumulative decline of 74.2 per cent between fiscal years 2013-14 and 2022-23. The study, conducted by SBI's Economic Department, aims to counter the prevailing notion of worsening inequality in India.By analysing income disparity curves from assessment years 2014-15 and 2023-24, the report notes a clear rightward shift in the income distribution curve, indicating that individuals in lower income brackets are increasingly improving their earnings. "Our analysis shows that there has been a cumulative 74.2 per cent decline in income disparity for those earning up to ₹5 lakh, reflecting the government's ongoing efforts to uplift the bottom of the pyramid," the report states.Specifically, the share of individuals earning up to Rs 3.5 lakh has dropped from 31.8 per cent in FY14 to 12.8 per cent in FY21, demonstrating a substantial 19 per cent increase in income relative to their population share. The report also mentions that the lower income group (earning less than Rs 5.5 lakh) has experienced positive growth rates over the last decade, aside from a dip during the COVID-19 pandemic.The study highlights a shift in income tax contributions, noting that states like Maharashtra, Delhi, Gujarat, and Karnataka are reaching saturation in income tax filings, with Uttar Pradesh emerging as a leader in expanding its income tax base, followed by Bihar, Andhra Pradesh, Punjab, and Rajasthan.Additionally, the report indicates that the contribution of direct taxes to total tax revenue has increased to 56.7 per cent in assessment year 2024, the highest level in 14 years. The direct tax-to- GDP ratio has also risen to 6.64 per cent, the highest since 2000-01, underscoring improvements in tax compliance.Income Tax Returns (ITRs) filed in AY24 reached approximately 8.6 crore, a substantial increase from 7.3 crore in AY22, with 79 per cent of returns submitted on or before the due date. The proportion of late-filed returns has fallen from 60 per cent in AY20 to just 21 per cent in AY24, reflecting enhanced compliance among taxpayers.

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SBI Study reveals 74.2% decline in income disparity since FY14

The study highlights a shift in income tax contributions, noting that states like Maharashtra, Delhi, Gujarat, and Karnataka are reaching saturation.

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