The Economic Research Department of the State Bank of India published a report on on income inequality and taxpayers’ data earlier this month, which shows that income tax returns filed by individual taxpayers in India earning between Rs 5 lakh and Rs 10 lakh jumped by 295 per cent in the assessment years 2013-14 and 2021-22, showing a positive trend of migration to a higher range of gross total income.
The number of ITRs filed by people earning between Rs 10 lakh and Rs 25 lakh has increased by 291 per cent in the same period while the Total number of persons filing income tax increased to 74 million in AY23 from 70 million in AY22. For the assessment year 2024, 82 million ITRs have been filed by 31 December 2023 and another 5-8 million returns are expected to be filed in the remaining financial year till March 2024, thereby taking the total number close to/over 85 million, which is 37 per cent of India’s formalized labor force.
The report also revealed that 36.3 per cent of individual ITR filers belonging to the Income group of less than Rs 3.5 lakh in AY15 (FY14) have left the lowest income group and shifted upwards while 15.3% are shifted each in the income group of Rs 3.5 lakh to Rs 5 lakh, and Rs 5 lakh to 10 lakh, 4.2% people shifted in the income group of Rs 10 lakh to Rs 20 lakh and rest further upwards.
At least 21.1 per cent of the gross income of the lowest income group of lower than Rs 4 lakh has shifted upwards with 6.6 per cent gross income shifted towards Rs 4 lakh to Rs 5 lakh group, 7.1% towards Rs 5 lakh to Rs 10 lakh group, 2.9% towards Rs 20 lakh to Rs 50 lakh group, and 0.8% in Rs 50 lakh to Rs 1 crore group.
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“There is a palpable change in income pattern of MSMEs too, reflecting the changing contours of industry/services as formalisation drive brings more entities into the net. Around 19.5 per cent of majorly micro sized firms have been able to shift their income upwards, to classify them into Small, Medium and large sized firms,” said Soumya Kanti Ghosh, Group Chief Economic Adviser, SBI.
Of these, 4.8 per cent firms have transitioned themselves into small firms, around 6.1 per cent firms transitioned into medium-sized firms, and 9.3 per cent firms transitioned into large sized firms. Ghosh believes this trend indicates that MSME units are getting bigger and integrated into larger value chains with initiatives like productivity linked incentives.
“The decline in income inequality is because of a great migration at the bottom of the pyramid; 36.3 per cent of individual ITR filers belonging to the lowest income in FY14 have left the lowest income bracket and shifted upwards resulting in 21.1 per cent more income for such individuals during FY14-FY21,” said the report.
First Published: Jan 18 2024 | 10:38 AM IST