Middle-Class Tax Burden Reduces As Those Earning Above Rs 50 Lakh Pay More

An increase in tax compliance in the Rs 50 lakh and above income group has led to a reduction in tax liability of the middle class, according to government officials aware of the matter.

The tax net has widened under the Modi government, with a 120% increase in returns filed between 2014 and 2024, from 3.6 crore to 7.9 crore, the high-ranking officials said on the condition of anonymity.

From those earning Rs 50 lakh and above annually, the number of returns has gone up from 1.85 lakh to 9.39 lakh, an increase of 5.1 times, and the income tax liability of that group has gone up from Rs 2.5 lakh crore to Rs 9.6 lakh crore.

The increased compliance has been a result of non-invasive enforcement and anti-evasion and black money laws. The increased compliance is a result of the combination of progressive tax policies, e-governance and a shift in focus from enforcement earlier to sharing of information with taxpayers, according to officials.

Returns with zero income tax have also gone up from 1.8 crore in 2014 to 4.9 crore in 2024 due to the new tax regime.

Additionally, around 75 lakh updated income tax returns have been filed this year for assessment year 2022–23, and about 90% of those were non-filers. They were able to file updated ITRs due to the two-year window provided by the government to rectify any declarations. This has led to more than Rs 8,000 crore as additional tax being paid.

In more signs of a reduction in burden, the percentage of income tax collection from taxpayers earning less than Rs 10 lakh reduced from 10.17% of the total tax paid in 2014 to 6.22% in 2024. There has been a 60% decrease in tax liability for those earning between Rs 10 lakh and Rs 20 lakh in that 10-year period, and about 40% decrease in nominal terms.

The government has already exempted those earning up to Rs 7 lakh from paying income tax.