Income Tax News: Limited Taxpayer Base in India, Despite Vast Population

Income Tax News Latest: India, with a population of approximately 140 crore, faces a striking paradox in its income tax landscape. Recent statistics reveal that merely 6.65 crore individuals, constituting a mere 4.8% of the total population and 6.3% of the adult population, contribute to the country's personal income tax collection. This situation raises concerns as a mere 5% of taxpayers shoulder a significant 76% of the total income tax revenue generated by the government.

Despite various measures like demonetization, the introduction of GST, and making Permanent Account Number (PAN) mandatory for significant financial transactions, the government's efforts to broaden the tax base have yielded limited results. Jefferies, a global investment bank, conducted a comprehensive 10-year analysis of India's individual income tax trends. Their findings highlight an annual growth rate of 8% in the number of income tax return filers.

The study also uncovers intriguing insights into the sources of income in India. Among the tax-filing population, salaried income constitutes 47% of the total income, while business income accounts for 45%. Between 2012 and 2021, the income derived from salaries experienced significant growth at a rate of 16%, amounting to Rs 25 lakh crore. In contrast, income from businesses, including proprietary businesses and consulting services, increased by 13% to reach Rs 15 lakh crore.

The data analysis further reveals notable differences in average incomes. Individuals declaring business income show an average income of Rs 5 lakh, which falls below the taxable income threshold. Conversely, employed individuals report an average income of Rs 7.9 lakh. This disparity is attributed to the Tax Deducted at Source (TDS) system, which necessitates transparency in employer-reported income. In contrast, business owners are required to self-declare their earnings.