The number of taxpayers in India is reportedly 1.46 crore, as confirmed by the Central Board of Direct Taxes in a tweet. This is a small number when you take the total population of 130 crore into perspective. CBDT further clarified that one crore taxpayer reported income between the range of Rs 5-10 lakh, while only 46 lakh reported over Rs 10 lakh.
Hence, only around 1.46 crore individual tax payers are liable to pay income-tax.
Further, around 1 crore individuals disclosed income between Rs. 5-10 lakh and only 46 lakh individual tax payers have disclosed income above Rs.10 lakh...4/6
— Income Tax India (@IncomeTaxIndia) February 13, 2020
A total of 5.78 crore individuals filed their income tax returns for the financial year 2018-19. Out of this, 4.32 crore individuals reported income below the tax bracket. A further breakup of the number reveals that 3.16 lakh people reported an income of over Rs 50 lakh.
The number of taxpayers with income above Rs 5 crore was reportedly a mere 8,600. The 2020 Budget reported a gross tax revenue of over Rs 24 lakh crore, a 12% increase compared to the revised estimates.
In the last 16 years, the number of tax returns increased by 62%, but the taxpayers increased only by 22%. The salary earners pay three times more tax than non-salary earning taxpayers. Not surprisingly, 4% of the taxpayers pay 60% of the total tax revenue generated.
Tax and Economy
The contribution of tax revenue to the nation’s economy is not very encouraging. It is apparent from the direct tax to GDP ratio, which stood at a 14 year low of 5.1%, as the total tax to GDP ratio was at 9.88%. This begs the question if India is an under-taxed country.
The tax to GDP ratio among Organisation for Economic Cooperation and Development countries was 34.3% in 2018. It is a significant reason for the difference is Social Security Contributions in these countries, which does not apply in India.
Fiscal deficit in India is estimated at 9.5% in the recent Union Budget, while market borrowing is calculated to be around Rs 12 lakh crore.
The pandemic was a major setback for the economy, considering the pre-pandemic fiscal deficit was targeted to be 3.5%. Sustaining growth and deficit reduction will be a challenge as the Indian economy slowly returns to normalcy.
Because of such a deficit, higher tax revenue would have been a welcome relief for the government. However, as observed in the 2021 Budget, the government keeps the direct tax burden unchanged.
Also read: What is retrospective taxation?