The number of income taxpayers in India has exceeded 10 crore, reflecting a significant expansion in the tax base, according to the latest time series data from the Central Board of Direct Taxes (CBDT). This marks a nearly 98% increase over the past decade, with the number of taxpayers growing from 5.26 crore at the end of Assessment Year (AY) 2013-14 to 10.41 crore by the end of AY 2023-24.
Tax buoyancy, a key indicator of how effectively tax revenues grow in relation to the economy, has also crossed the threshold of 2 for the second time in 14 years. The surge in tax buoyancy suggests that tax collections have grown at more than twice the rate of nominal GDP growth, underscoring the strength of India's revenue system.
Widening of the Tax Base
Officials attribute this remarkable growth to the formalisation of the Indian economy and an expanding tax base. "The formal sectors of the economy have grown, leading to an increase in employment and, consequently, more taxpayers. Even during the pandemic years, we saw a 10% increase in taxpayers," noted an official from the department. The past two years alone have seen a growth rate of 17-20%, driven by new opportunities for identifying potential taxpayers through data mining and analytics.
The Income Tax Department’s data-driven approach, focusing on high-value consumption and expenditure patterns, has helped field officers identify potential taxpayers more effectively. This includes verification of luxury expenditures and other large transactions through non-intrusive data collection from sources like hotels, luxury retailers, and medical services.
Increase in Income Tax Returns Filings
Along with the increase in the number of taxpayers, the number of income tax return filers has also surged. In FY24, over 8.09 crore income tax returns were filed, representing a 144% growth compared to 3.31 crore filings in FY14. This rise reflects the success of the department’s efforts in improving tax compliance across the country.
Tax Buoyancy Returns to 2+ Level
Tax buoyancy in FY24 surpassed 2, indicating strong revenue growth despite economic fluctuations. Defined by the International Monetary Fund (IMF) as the ratio of percentage change in tax revenue to percentage change in GDP, tax buoyancy is crucial for tax policy planning. A high buoyancy rate shows that India’s tax collection has grown faster than its GDP, signaling the efficiency of the country’s tax administration and policy adjustments.
Conclusion
India's growing taxpayer base, supported by enhanced compliance measures and efficient tax administration, reflects the country’s progress towards a more formalised economy. The increase in tax buoyancy further highlights the responsiveness of tax revenues to economic growth, positioning India’s tax policy framework on a solid footing for the future.
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