SBI recently shared a research report titled ‘Deciphering Emerging Trends in ITR Filing: The Ascent of the New Middle Class in Circular Migration’ and it has some interesting insights:
1. Number of ITRs filed
- For AY24, 6.8 crore ITRs have been filed by the due date and another 1.8-2 crore returns are expected to be filed in the remaining financial year till March 24, thereby taking the total number close to 8.5 crore which is nearly ~37% of formalized labor force.
- Interestingly, apart from the increasing number of returns filed every year, the share of returns filed after due date (i.e., with fine) has also declined from a high of 60% in AY20 to merely 25% in AY23 indicating the growing discipline among tax-payers along with the simplification of IT forms and processes.
2. As per previous year’s ITR data, Nearly 42% filers are in ITR-1, whose Income<=50 lakhs, salary, pension, one house property
3. Material decline in zero tax liability
- There has been a material decline in zero tax liability, their share in total returns filed has declined to 64% in AY23 from 84.1% in AY12
Weighted mean income of Rs 4.4 lakh in AY14 has increased to Rs 13 lakh in AY23
What is weighted mean income?
An approximate average income range which most of the people are earning based on the gross total income of those people who filed ITR.
- Growth from Rs 4.4 lakh in AY14 to Rs 13 lakh in AY23 shows that there is a steady growth in the number of people who are shifting from low income range to middle and higher income ranges.
How is it calculated?
Projections:
- Although it is tough to predict how things are going to pan out after 25 years, past 10 years data has been encouraging and one can hope that things can pick up even better from hereon.
Transition of Lower Middle Income Class to Middle and Upper Class in past 10 years
While, these mean incomes and projections can really seem over-optimistic based on current scenario, This transition of lower middle income to higher ranges has been the most positive development and is an encouraging data-point which hopefully should get much better in the coming years.
In Assessment Year (AY) 2011-12 (FY11), 84% of 1.6 crore People who filed ITR belonged to an income group of up to Rs 5 lakhs.
In AY23, 68.5 million people filed ITR with maximum concentration of only 64% population still in the income group of up to Rs 5 lakhs
Effectively, 13.6% population has left the lower income strata and migrated upwards in AY23 in comparison with AY12
8.1% population has increased in the income group of Rs 5 lakh- Rs10 lakh, 3.8% population has increased in the income group of Rs10 lakh - Rs20 lakh, 1.5% population has increased in the income group of Rs 20 lakh – Rs 50 lakh
0.2% population has increased in the income group of Rs 50 lakh - Rs1 crore, while close to 0.02% population has increased in the income group of above Rs 1 crore.
What was the most surprising data-point in this report for you? and do you have any counter-arguments against these points?
