Indians are turning more disciplined in filing tax returns as the delayed filing has fallen sharply this year, as per a report from SBI Research which analysed Income Tax Return (ITR) filings data. The share of returns filed after the due date (with fine) has witnessed a significant decline from a high of 60 per cent in assessment year (AY) 2020 to merely 25 per cent in AY23.
This number is expected to fall further to 20 per cent in AY24. “This reveals the discipline among tax-payers along with the simplification of IT forms and processes driven by constant efforts of CBDT to build an efficient, digital-heavy filing, verification and return architecture sans hassles,” it said.
Furthermore, the number of Indians paying tax has also increased in AY23. The total ITRs filed during AY23 surged to 78 million from 73 million in AY22. Of these, 58 million or 75 per cent of the returns were filed on or before the due date, said the report.
For AY24, 68 million ITRs have been filed by the due date and another 18-20 million returns are expected to be filed in the remaining financial year till March 2024. The ITR filing is likely to cross 85 million in the current assessment year.
Rising income of the middle class
An interesting find from the report is an increase in the income of the middle class population. The report says that the weighted mean income of Rs 4.4 lakh in AY14 has increased to Rs 13 lakh in AY23.
It can be linked with transition from lower income group to upper income group. A buoyancy in the number of tax-filers who were earlier not reporting income is another significant factor. “If cases of non-reporting and under-reporting of income can be controlled, there will be a significant jump in the weighted Mean Income of the ITR filers,” the report stated.
“It is projected that weighted mean income is expected to increase from Rs 13 lakhs currently to Rs 49.7 lakhs in 2047, particularly due to increase in number of tax-filers, as also due to shifting of distribution of tax-filers from lower income group to upper income group,” it further added.
It also indicated that nearly 25 per cent of the ITR filers are expected to leave the lowest income strata by FY47 with around 17.5 per cent filers expected to shift to income group of Rs 5 lakh-Rs 10 lakh, five per cent expected to shift to income group of Rs 10-Rs 20 lakh and three per cent expected to shift to income group of Rs 20-50 lakh.
New trends decoded
The SBI report presented a comparison of the type wise ITRs filed which showed that AY23 witnessed an increase in filing of ITR-2 to 10.3 per cent from 8.6 per cent in the previous year.
Meanwhile, ITR-1, ITR-3 and ITR-4 constituted 42.3 per cent (43.4 per cent in AY22), 16.1 per cent (16.5 per cent in AY22) and 27.4 per cent (27.4 per cent in AY22), respectively in AY23.
In AY24, data available for 13.6 million returns indicates that 55 per cent fall under the category of ITR-1. This is followed by 29 per cent of ITR-4, 8 per cent of ITR-2 and 7 per cent of ITR-3. The lower share of filings under ITR-3 can be considered as an indication that people with business income constitute the maximum among those who file the returns late (with fine).
Which state filed the highest ITRs?
Maharashtra topped the chart for most number of ITRs filed in AY23 followed by Uttar Pradesh, Gujarat, Rajasthan and West Bengal. These states constitute around 48 per cent of the total income tax returns filed, as per the report.
Overall, 64 lakh more ITRs have been filed in AY23 over AY22. The increase in net number can be attributed to a surge in registration in five states including Maharashtra, Uttar Pradesh, Punjab, Gujarat and Rajasthan.