Assessment Year 2024 Poised for a 20% Drop in Late-Filed ITRs, Reveals Latest Report

The State Bank of India's recent report on income tax filings reveals a significant uptick in the number of individuals filing income tax returns in the assessment year 2022-23 (AY23). The report sheds light on various aspects of this increase, showcasing a notable shift in income brackets, evolving taxpayer discipline, and a decline in income inequality.

Surge in Tax Filings and Shifting Income Brackets

• The total number of persons filing income tax increased to 74 million in AY23 from 70 million in AY22.
• The income tax department's breakdown highlights a remarkable shift in the number of individual taxpayers across different gross total income categories.
• Between AY14 and AY22, individuals earning between Rs 5 lakh and Rs 10 lakh experienced a 295% surge, while those earning between Rs 10 lakh and Rs 25 lakh saw a 291% increase.

Projections for AY24 and Improved Filing Processes

• For AY24, 82 million ITRs have been filed till December 31, with an expected total exceeding 85 million by the end of the financial year.
• The report anticipates a drop in the share of IT returns filed after the due date to around 20%, attributing it to taxpayer discipline and streamlined filing processes.

Reduced Income Inequality and Upward Mobility

• The analysis of tax return data reveals a dip in income inequality, as measured by the Gini coefficient, during FY14 and FY22.
• A noteworthy finding is that 36.3% of individuals in the lowest income group in FY14 have moved up the income ladder.

Upward Mobility Trends in AY15

• Data from AY15 (FY14) indicates significant upward mobility among individual ITR filers within various income groups.
• Specifically, 36.3% of those in the less than Rs 3.5 lakh income bracket have transitioned to higher income segments.

Detailed Transition Patterns

• Among those initially in the lowest income group, lower than Rs 4 lakh, 21.1% of the gross income has ascended to higher brackets.
• This includes transitions to Rs 4 lakh to Rs 5 lakh (6.6%), Rs 5 lakh to Rs 10 lakh (7.1%), Rs 10 lakh to Rs 20 lakh (2.9%), and Rs 20 lakh to Rs 50 lakh (0.8%).

Conclusion

The report suggests a positive economic transformation in India, reflected in the increasing number of income tax filings and a notable shift in income brackets. The projections for AY24 and the decline in income inequality underscore the efficiency of streamlined tax processes and taxpayer discipline, contributing to a more robust and inclusive financial landscape.