Income Disparity For Low Earners Down 74% Since FY14: SBI
Income gains and tax compliance improvements highlight government efforts to reduce inequality, as ITR filings reach 8.6 crore in AY24
A State Bank of India (SBI) report released on Friday revealed a cumulative 74.2 per cent reduction in income disparity for individuals earning up to Rs 5 lakh annually from fiscal years 2013-14 to 2022-23. This analysis, conducted by SBI's Economic Research Department, challenges the “myth of worsening inequality” in India by comparing income distribution curves across assessment years (AY) 2014-15 and AY24/FY23.
The study highlighted a shift in income distribution for low-income groups, indicating that individuals in lower brackets are closing the income gap relative to their population share. “Our analysis shows a cumulative 74.2 per cent decline in income disparity for earners up to Rs 5 lakh, demonstrating that government initiatives are reaching those at the bottom of the pyramid,” the report, titled How Tax Simplification Has Given a Necessary Fillip to ITR Filing, stated.
Specifically, for earners with annual incomes up to Rs 3.5 lakh, income disparity coverage decreased from 31.8 per cent in FY14 to 12.8 per cent in FY21, indicating a significant income increase for this group. The lower income segment, those earning below Rs 5.5 lakh, showed consistent growth over the past decade, with the exception of AY20 due to the COVID-19 pandemic.
The report also noted that states traditionally strong in tax filing, such as Maharashtra, Delhi, Gujarat, and Karnataka, are nearing saturation in their tax base, while Uttar Pradesh has taken the lead in tax base growth, followed by Bihar, Andhra Pradesh, Punjab, and Rajasthan.
Additionally, the report pointed out a record 56.7 per cent contribution from direct taxes to total tax revenue in AY24, marking the highest share in 14 years. The direct tax-to-GDP ratio also reached 6.64 per cent, its highest since 2000-01, reflecting improved tax compliance.
Income Tax Return (ITR) filings saw a significant rise, reaching about 8.6 crore in AY24, compared to approximately 7.3 crore in AY22. Furthermore, 79 per cent of ITRs were filed by the due date, leading to a decrease in late filings with penalties, which fell from 60 per cent in AY20 to just 21 per cent in AY24.
