Income tax liability on individuals earning below Rs 20 lakh a year, categorised as middle class, has reduced in the first ten years of the Narendra Modi government, while the burden on those earning above Rs 50 lakh has increased, as per date released by the tax department.
However, the data also showed that while the incomes of the top of the income pyramid have risen a fast clip, the number of entry-level taxpayers have grown at a much lower rate. This in a way shows a reduced growth of the middle class, while those in upper strata of the income pyramid is multiplying their incomes.
The number of individuals showing annual income of over Rs 50 lakh has gone up to 9.39 lakh in 2023-24 from 1.85 lakh in 2013-14, a jump of 407%. Also, the income tax liability of those earning above Rs 50 lakh has risen 282%, from Rs 2.52 lakh crore in FY14, to Rs 9.62 lakh crore in FY24.
For those in the income bracket of Rs 10-15 lakh, the average tax liability has reduced to Rs 1.1 lakh in FY24, from Rs 2.3 lakh in FY14. For individuals earning between Rs 15-20 lakh, the average tax liability has shrunk to Rs 1.7 lakhs from Rs 4.1 lakhs.
As per an official source, nearly 76% of the income tax collected by individuals in FY24 were from those earning above Rs 50 lakh a year. “This has led to reduced tax burden on the middle class,” the source noted.
“Increase in tax mop-up from high income earners has been possible due to effective tax governance, anti-tax evasion measures carried out in the past 10 years, better compliance, and change in the manner of connecting with the taxpayers,” the source explained.
The data also showed that the number of returns filed by income earners in the Rs 0-2.5 lakh bracket, reduced starkly by 38.6% between FY14 and FY24. This depicts individuals are moving to higher income ranges, said sources.
Additionally, adjusted for inflation, there is almost a 60% decrease in tax liability by income earners between Rs 10-20 lakh, they said.
The income tax liability of those earning between Rs 2.5 and Rs 7 lakh was an average Rs 43,000 in 2023-24, which is around 4-5% of their income — a level which is the lowest amongst emerging economies, a source said
Meanwhile, they said, in assessment years 2022-23 & 2021-22, about 7.5 million updated Income Tax Returns (ITRs) were filed, which lead to an additional revenue gains of Rs 8,000 crore by the I-T Department. “This has been possible due to a change in the method in which taxpayers interact with authorities,” an official said.
The number of income tax returns filed by individuals have increased, from over 3.60 crore in 2013-14, to 7.97 crore in 2023-24, representing an increase of 121%.
Source from: https://www.financialexpress.com/money/tax-burden-shifting-to-super-rich-but-middle-class-barely-growing-3664562/
