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Income disparity in India declines 74.2% Since FY14

Mumbai: The income disparity coverage for those earning up to Rs 5 lakh annually between fiscal years 2013-14 and 2022-23 in India reported  a cumulative 74.2 per cent decline. A report published by the Economic Department of  State Bank of India (SBI) showed this.

According to the SBI report, India’s progressive tax regime has increased direct tax contributions to 56.7 per cent of total tax revenue in Assessment Year (AY) 2024. This is  the highest in 14 years. Since FY2021, Personal Income Tax (PIT) collections have outpaced Corporate Income Tax (CIT), growing by 6% compared to CIT’s 3 per cent.

‘Our analysis shows that there has been a cumulative 74.2% decline in income disparity coverage for those earning up to Rs 5 lakh. This shows the continuous efforts of Govt are reaching the bottom of pyramid – that is leading to increase in income of ‘lower income group’ people,’ said the report titled ‘How Tax Simplification has given a necessary fillip to ITR Filing’.

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For people with income up to Rs 3.5 lakh, the share in income disparity has reduced from 31.8 per cent in FY14 to 12.8 per cent in FY21. Lower income group (less than Rs 5.5 lakh) has registered a positive growth rate for all years in last decade (except AY20 – due to Covid pandemic).

According to the research report, states such as Maharashtra, Delhi, Gujarat and Karnataka are nearing saturation in ITR filing and their share in overall tax file base is decreasing continuously. These states   have been traditional leaders in income tax base. Uttar Pradesh is the leader in increasing share in income tax file base, followed by Bihar, Andhra Pradesh, Punjab and Rajasthan.

The SBI study showed that, contribution of direct taxes to total tax revenue reached 56.7 per cent in AY24 (54.6 per cent in AY23), the highest in 14 years. Direct taxes to GDP ratio inched up to 6.64 per cent in AY24, highest since 2000-01.

Income Tax Returns (ITRs) filed during AY24 witnessed a phenomenal jump, standing at about 8.6 crore (against about 7.3 crore in AY22).A total of 6.89 crore or 79 per cent of the 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 merely 21 per cent in AY24.

 

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