The percentage of taxpayers in the Rs 10 lakh per annum tax bracket has increased from 5.6% in fiscal 2015 to 12.8% in fiscal 2021.
The data was released by the Finance Ministry, in response to a Lok Sabha question posed by Trinamool Congress MP Mahua Moitra.
The ministry shared the details on the taxpayer data from FY15 to FY21, with respect to income brackets of taxpayers, number of corporate and personal taxpayers, and collections under each of these heads.
The income bracket of Rs 0–5 lakh has seen growth in taxpayers, but its proportion as a percentage of total taxpayers has gone down from 81% in FY15 to 65% in FY21.
This was picked up by the higher tax brackets, as seen in percentage growth as a proportion of total taxpayers in the tax bracket of Rs 5–10 lakh per annum and above Rs 10 lakh per annum.
Under the Rs 5–10 lakh per annum bracket, the percentage growth has increased from 13% in FY15 to 22% in FY21. Similarly, the income bracket above Rs 10 lakh per annum, as a proportion of total taxpayers, has grown from 5.6% in FY15 to 12.8% in FY21.
The largest single-year jump in this category was seen between FY20 and FY21, from 54 lakh taxpayers to 81 lakh taxpayers in the above Rs 10 lakh per annum income bracket.
The trends evidence the governmental measures taken in bringing in various amendments and efforts to widen the tax base to bring more individuals within the tax net, according to Amarpal Chadha, tax partner at EY.
The increase in the number of tax payers in the Rs 0-5 lakh bracket cannot be interpreted as rising tax collections, Chadha said.
“As the data suggests, while the number of tax returns filed by individuals in the income slab of Rs 0–5 lakh has increased over the period of last six years and more people have been brought into the ambit of taxation," he said, "(but) it need not necessarily be interpreted as increase in tax collection, since there is a rebate available for resident taxpayers having a total income of up to Rs 5 LPA."
Irrespective of the tax regime, income upto Rs 5 LPA can avail the benefit of a tax rebate under Section 87A of the Income Tax Act, making their net tax liability nil. This rebate in the new tax regime was extended till the income of Rs 7 lakh per annum in the 2023 Budget.
While it might not translate into an addition taxes necessarily, bringing more people into the tax net affords visibility on these individuals, who may not be otherwise part of the tax system, Chadha said.
As of FY21, the total income tax collected stood at Rs 4.7 lakh crore, according to government data.
Revenue Impact Of New Regime
The impact of the changes on personal taxes, as announced in the budget, is yet to be seen as it will become effective from April 1, 2023, that is, in FY24. The corresponding income tax assessment year for this would be AY 2024–25.
Prior to the budget changes, the migration to the new regime from the old regime was "not a very high number", according to Revenue Secretary Sanjay Malhotra, who spoke to BQ Prime on the budget day.
A person with an income of Rs 15 lakh or more now needs to save about Rs 3.75 lakh in tax-exempt instruments or have deductions of that amount in order to still reap the benefits of the old regime, Malhotra said.
"I do think that more than 50% should now find the new regime more attractive," he said.
In a post-budget interview, India's Finance Secretary TV Somanathan, told BQ Prime that people earning between Rs 7 and Rs 10 lakh per annum would benefit from the new tax regime. He expects a large majority to shift to the Rs 5-7 lakh per annum category, including a substantial portion of income earners who earn between Rs 7 to Rs 12-15 lakh per annum, particularly the breadwinners in that category.
In terms of corporate tax, the government saw a more willing shift to the new tax regime. According to Revenue Secretary Malhotra, about 61% of corporate taxes are coming from the exemption-free 22% new tax regime.
Post FY20 and FY21, which followed the introduction of the concessional tax regime, data shows that the corporate tax collections have grown to Rs 7.12 lakh crore in FY22.
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