The average income of taxpayers in India has grown from ₹4.4 lakh in financial year 2012-13 to ₹13 lakh in FY22 based on the gross income data of income tax returns, according to SBI Research.

One of the major reasons is the transition from the lower income group to the upper income group, writes Soumya Kanti Ghosh, group chief economic adviser, State Bank of India. Another reason is buoyancy in the number of tax filers who were earlier not reporting income.

The average income is expected to touch ₹50 lakh in 2047 with the shifting of distribution of tax filers from the lower income group to the upper income group, the report says.

As a result, per capita income is expected to increase from ₹2 lakh in FY23 to ₹14.9 lakh in FY47, says SBI Research. In dollar terms, the corresponding increase comes to around $12,400 in FY47 from $2,500 in FY23.

Around 25% of ITR filers are expected to leave the lowest income strata by FY47 as against 13.6% leaving the lowest income strata between FY11-FY22, the report says. ITR filers are expected to increase from 70 million in FY23 to 482 million in FY47, increasing its share in the workforce with taxable base from 22.4% in FY23 to 85.3% in FY47.

This comes when total income tax returns filed during FY22 increased to 78 million from 73 million in FY21. Of these, 58 million or 75% of the returns were filed on or before the due date. Interestingly, apart from the increasing number of returns filed every year, the share of returns filed after the due date has also declined from a high of 60% in FY19 to merely 25% in FY22.

For the assessment year 2023-24, 68 million ITRs have been filed by the due date and another 18-20 million returns are expected to be filed in the remaining financial year till March 2024, thereby taking the total number close to over 85 million, around 37% of formalised labour force, says Ghosh.

“For AY24, we believe the share of IT returns filed after the due date may drop to around 20%. This reveals the discipline among tax-payers along with the simplification of IT forms and processes driven by constant efforts of CBDT to build an efficient, digital-heavy filing, verification and return architecture sans hassles,” it says.

Comparing the ITRs filed, AY23 witnessed an increase in filing of ITR-2 to 10.3% from 8.6% in the previous year. ITR-1, ITR-3 and ITR-4 constituted 42.3% (43.4% in AY22), 16.1% (16.5% in AY22) and 27.4% (27.4% in AY22), respectively in AY23.

In the current year, AY24 as per the break-up available for 13.6 million returns maximum or 55% are ITR-1, followed by 29% ITR-4 and 8% ITR-2 and 7% ITR-3. “If we go by the previous year trends, the lower share of ITR-3 filed so far indicates that people with business income constitute the maximum among those who file the returns late (with fine),” it says.

There has been a material decline in zero tax liability, their share in total returns filed has declined to 64% in AY23 from 84.1% in AY12. “Juxtaposing the same against buoyancy in tax filing numbers witnessed in recent years and calibrating with migratory patterns emerging as mass of the working population seeks befitting opportunities across the latitude of the vast country could help policymakers in formulating next level measures as the economy gears up to take the leap of faith,” says Ghosh.

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