The number of taxpayers in India is reportedly 1.46 crore, the Central Board of Direct Taxes confirmed in a tweet. This is a small number considering the total population of 130 crore. The CBDT further clarified that one crore taxpayers declared income between Rs 5 lakh and Rs 10 lakh, while only 46 lakh declared income above Rs 10 lakh.

A total of 578 million people have filed their income tax returns for the financial year 2018-19. Of these, 432 million people declared income below the tax bracket. A further breakdown of the figures shows that 316,000 people declared income above Rs 50 lakh.

The number of taxpayers with income above Rs 5 crore was reported to be only 8,600. Budget 2020 showed gross tax revenue of over Rs 24 lakh crore, an increase of 12% over the revised estimates.

Over the last 16 years, the number of tax returns has increased by 62%, but the number of taxpayers has only increased by 22%. Salary earners pay three times more tax than non-salary earners. Not surprisingly, 4% of taxpayers pay 60% of total tax revenue.

Taxes and economy

The contribution of tax revenue to the country’s economy is not very encouraging. This is reflected in the direct tax rate, which was at a 14-year low of 5.1%, while the total tax rate was 9.88%. This raises the question of whether India is a country with too few taxes.

The ratio of taxes to GDP in the countries of the Organisation for Economic Co-operation and Development was 34.3% in 2018. A major reason for this difference is the social security contributions in these countries, which do not apply in India.

India’s fiscal deficit is estimated at 9.5% in the latest federal budget, while market debt is estimated at around Rs 12 billion.

The pandemic has been a major setback for the economy considering that the fiscal deficit was supposed to be 3.5% before the pandemic. As the Indian economy slowly returns to normalcy, maintaining growth and reducing the deficit will be a challenge.

Given this deficit, higher tax revenues would have been a welcome relief for the government. However, as stated in the 2021 budget, the government is leaving the direct tax burden unchanged.

The story continues

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