Tax simplification boosts ITR filings and reduced income disparity: SBI

The latest data from State Bank of India ( SBI ) research reveals that income tax returns have gone up substantially and the upward movement towards improving the pattern of income distribution between AY 2015 and AY 2024 continues. The curve for reduction in income inequality in incomes up to Rs 5 lakh came down to 74.2 per cent, which means that the schemes were effectively increasing the income of the lower-income groups.

Direct tax contributions touch a 14-year high

India's progressive tax regime brings direct tax contributions to 56.7 per cent of total tax revenue in AY 2024, the highest in the last 14 years. Since FY 2021, PIT has outgrown CIT, growing by 6 per cent this time around against CIT at 3 per cent.

Direct Taxes to GDP ratio reaches highest since 2000

The ratio of direct tax to GDP reached 6.64 per cent in FY 2024, which is the highest in history since 2000-01. The level of buoyancy of direct tax has shown an impressive increase from 1.25 to 1.86, while the cost of collection declined to 0.44% in FY 2024 from 0.51 per cent in FY 2023.

State Share in Direct Tax Collections

The top five states account for more than 70 per cent of the total direct tax collections, with Maharashtra alone contributing about 38.9 per cent. This contrasts with states such as Rajasthan, Punjab, and Uttar Pradesh, which have reported lower per capita direct taxes and incomes.

Sustaining a higher growth trajectory for ITR filers

ITR filings for AY 2024 have gone up to about 8.6 crore compared to 7.3 crore for AY 2022, and 79 per cent of returns have been filed in time. So far, estimates hint at a number of 9 crore plus taxpayers for AY 2025-a rather formidable jump from taxpayer participation.

Increasing the Rank and File: Taxpayers and Income Mobility

Taxpayer count has risen 2.3 times in the last ten years. For AY 2024, it was at 8.62 crore. The number of high-income taxpayers or crorepatis has seen a five-fold increase during the last ten years from AY 2014. Women today comprise around 15 per cent of all individual filers, which speaks volumes for this new demographic representation.

Income Inequality Decreases

A measure of income inequality, the Gini coefficient has been stable and falling. In AY 2013, it was 0.489, whereas in AY 2024, it was down to 0.460. The projection for the next year, AY 2025, is 0.441-that means more upward mobility for taxpayers who earn less.

New States Powering Rising Direct Tax Revenue Filings

Saturation is near in the traditional leaders in terms of income tax collection, which means their percentage is going to reduce as a whole. In comparison to that, the leading states are Uttar Pradesh, Bihar, Andhra Pradesh, Punjab, and Rajasthan which are witnessing a huge growth in their income tax filing base.

Female Labour Force Participation on the Rise

The Periodic Labour Force Survey (PLFS) indicates that labour force participation of females has increased from 23.3 per cent in 2017-18 to 41.7 per cent  in 2023-24 and thus rose by 18.4 per cent. Such an increase has been particularly on the rise in states like Jharkhand and Odisha.