NEW DELHI: Tax burden on the middle class has come down noticeably over the last 10 years, a government source said on Wednesday.
He said that after the income tax exemption limit was raised from Rs 2 lakh to Rs 7 lakh, there has been a marked increase in the number of individuals filing zero income tax returns, a source told TNIE.
Since the introduction of the new exemption limit in 2024, there has been a notable decline in the percentage of income tax collection from taxpayers earning less than Rs 10 lakh.
“The contribution of this group has decreased from 10.17% of the total tax paid in 2014 to just 6.22% in 2024,” the source said.
“When we see the statistics, income tax paid by those earning between 2.5 lakh to 7 lakh in 2014, a decade back, it was Rs 25,000. Today, the tax liability is zero,” the source added.
In addition, the source said that people who have earning more than Rs 50 lakh stood at 1.85 lakh in 2014 and in 2024 it is 9.39 lakh, which is a rise of 391%.
“So as against an overall percentage increase of 120% in the overall income tax returns of individuals, the number of returns filed by people who are earning more than 50 lakh, the increase is 391%. This implies that as a percentage, the growth in the number of returns being filed by people above 50 lakh income has increased much more than the growth in overall returns.”
He pointed out that the tax liability on the lower or the middle income group has gone down, whereas the compliance and the tax liability of people who are earning more than 50 lakh has gone up.
“There has been a significant increase in the number of tax returns filed by people earning over Rs. 50 lakhs, owing to strict laws against tax evasion and black money introduced by the Modi government. In 2014, only 1.85 lakh individuals in this income bracket filed tax returns. By 2024, this number has jumped to 9.39 lakhs, marking an increase of over five times,” the source said.
Additionally, the income tax paid by those earning above Rs. 50 lakhs has also risen dramatically. In 2014, it was Rs 2.52 lakh crores, and by 2024 it has soared to Rs 9.62 lakh crores, which is a 3.2 times increase. Currently, 76% of the total income tax collected comes from this group of high earners, he highlighted.
“A comparison of tax burden at two different points should adjust the income levels for nominal growth in income. For example, the tax liability of a person in tax bracket of Rs 5-7.5 lakh a decade ago should be compared to a higher tax bracket of Rs 13-19 lakh, assuming the annual income growth is 10%,” said Anil Kumar Sood, co-founder at the Institute for Advanced Studies in Complex Choices.