India sees 74% drop in income disparity since AY15, direct tax collection highest in 14 years

There has been a cumulative 74.2 per cent decline in income disparity coverage for those earning up to Rs 5 lakh in India, showing that the continuous efforts of government are reaching the bottom of pyramid, leading to increase in income of ‘lower income group’ people, a new report has revealed.

A comparison of disparity in income during assessment year (AY)15 and AY24 by the economic department of the State Bank of India (SBI)

showed that there is a clear rightward shift in the income distribution curve in India, signifying people in lower income brackets are increasing their income to converge towards their share in population.

“Declining income inequality mirroring upward transition of lower income people along with their income is evident as 43.6 per cent individual ITR filers, belonging to income group of less than Rs 4 lakh in AY15 (FY14), have left the lowest income group and shifted upwards,” the findings showed.

Also, 26.1 per cent of the gross income of lowest income group of lower than Rs 4 lakh has shifted upwards in the intermittent period, the study noted.

Female Labour force participation is on the rise (from 23.3 in 2017-18 to 41.7 in 2023-24), with Jharkhand, Odisha, Uttarakhand, Bihar and Gujarat fanning the maximum movement.

With an increasing alignment with progressive taxation regime, contribution of direct taxes to total tax revenue reached 56.7 per cent in AY24 (54.6 per cent in AY23) — the highest in 14 years.

The growth rate of personal income tax (PIT) collections has been surging faster than corporate tax collections since FY21, with PIT increasing by 6 per cent against CIT’s 3 per cent growth, the SBI study noted.

ITRs filed during AY24 witnessed a phenomenal jump, standing at 8.6 crore (against 7.3 crore in AY22). A total of 6.89 crore or 79 per cent of these returns were filed on or before the due date, the concomitant result in the share of returns filed after due date (with fine) thus declining from a high of 60 per cent in AY20 to merely 21 per cent in AY24.

“We believe the total number of ITRs filing for AY25 could swell more than 9 crore by end March 2025 (7.3 crore ITRs have been filed by the due date) while inculcating more discipline amongst the filers,” said the SBI study.

(With inputs from IANS)