An SBI’s report, on the commemorative occasion of India’s 77th Independence Day has unveiled a profound projection that might chart the nation’s trajectory towards an unprecedented fiscal transformation.
The report titled “Deciphering emerging Trends in ITR Filing: The Ascent of the new Middle Class in circular migration” projected exponential surge in income tax return filings, coupled with a shift towards higher income brackets and enhanced fiscal discipline and positions India on the cusp of a middle-income prosperity by FY47. This anticipated surge in tax return filings is not a solitary phenomenon; it resonates with a commensurate upward shift in the strata of higher income tax brackets.
The anticipated rise in tax filings is set to be accompanied by a corresponding increase in individuals falling within higher income tax brackets. The report suggests that approximately 25 per cent of Income Tax Return (ITR) filers will transition out of the lowest income strata by FY47. The report further indicates that the per capita income is expected to climb from its current Rs 2 lakh in FY23 to an impressive Rs 14.9 lakh by FY47. This shift in fortunes is attributed to the shift of individuals from lower to upper-income groups, coupled with a surge in the number of tax filers reporting their income.
The geographical landscape of tax filing in India is evolving as well, with Maharashtra, Uttar Pradesh, Gujarat, Rajasthan, and West Bengal emerging as the top five states for tax filing in Assessment Year 2023 (AY23), constituting nearly 48 per cent of total returns. Over AY22, there was an overall increase of 64 lakh ITR filings in AY23, with Maharashtra showing the maximum increase.
The report also underscores the importance of capturing inter-state migration within ITR returns to enhance policy narratives. Additionally, India’s workforce is predicted to expand from 530 million in FY23 to 725 million by FY47, encompassing 45 per cent of the population.
An aspect of significant note is the improved discipline observed in ITR filing. The report predicts an estimated 85 million returns for Assessment Year 2024 (AY24). Notably, the proportion of returns filed after the due date has significantly decreased from 60 per cent in AY20 to merely 25 per cent in AY23. This transformation is attributed to simplified forms and user-friendly digital processes introduced by the Central Board of Direct Taxes (CBDT).
Furthermore, the report highlights that 42 per cent of taxpayers filed ITR-1, particularly those with incomes up to Rs 50 lakh, encompassing salary, pension, and single-house property. The percentage of zero tax liability filers has markedly reduced, dropping from 84.1 per cent in AY12 to 64 per cent in AY23.
The efficiency of tax return processing has also shown marked improvement. While only about half of the returns were processed on time in AY 2022, 64 per cent of the filed returns were processed by the due date in AY24. Moreover, the report reveals that returns processed (43 million) as a percentage of verified returns (60 million) stands at an impressive 72 per cent in AY24.
In this orchestration of numbers, percentages, and projections, the report lays the foundations for not merely an economic prognosis but a contemplative exploration into the synergies of policy reform, societal transformation, and fiscal dynamism. As India strides resolutely towards its fiscal horizon, these reflections are poised to engender a nuanced discourse, sparking the intellect of scholars, policymakers, and citizens alike.