0.16% of India's Population Pays 76% of Income Tax Paid by Individuals - Vivek Kaul's Diary
Free Reports

0.16% of India's Population Pays 76% of Income Tax Paid by Individuals

Dec 22, 2017

28

A couple of days back, the ministry of finance published income tax data for assessment year 2015-2016. The income tax returns for the income earned during the financial year 2014-2015 were filed in the assessment year 2015-2016.

I had written a similar piece last year based on data published for the assessment ears 2013-2014 and 2014-2015. This piece is an extension of that.

We now have data for four assessment years starting with 2012-2013 and up to 2015-2016, and it makes for an interesting reading. Let's start with Table 1.

Table 1:
Assessment year Total number of returns filed by individuals Total number of individuals paying income tax
2012-2013 2,87,66,258 1,25,18,636
2013-2014 3,35,85,294 1,66,47,061
2014-2015 3,65,13,034 1,90,97,559
2015-2016 4,07,39,799 2,05,72,727
Source: incometaxindia.gov.in

What does Table 1 tell us? It tells us very clearly that both the number of tax returns filed by individuals as well as the number of people paying tax has been growing over the years.

While, the total number of returns being filed by individuals has risen at 12.3 per cent per year, the total number of individuals paying income tax has risen at the rate of 18 per cent per year and that is clearly good news.

Now let's take a look at the proportion of people filing income tax returns, who also pay income tax (in Table 2).

Table 2:
Assessment year Total number of returns filed by individuals Total number of individuals paying income tax Proportion of people filing income tax returns who also pay income tax
2012-2013 2,87,66,258 1,25,18,636 43.52%
2013-2014 3,35,85,294 1,66,47,061 49.57%
2014-2015 3,65,13,034 1,90,97,559 52.30%
2015-2016 4,07,39,799 2,05,72,727 50.50%
Source: incometaxindia.gov.in

Table 2 clearly tells us that only half of people filing income tax returns pay income tax. This ratio is way too low. What this basically means is that the current system is so structured that it is generating a lot of work for chartered accountants and others who are in the business of filing income tax returns.

How do things look vis a vis overall population? Let's take a look at Table 3.

Table 3:
Assessment year Total number of returns filed by individuals (in Crore) Population Proportion of population filing income tax returns
(in Crore)*
2012-2013 2.88 126.4 2.28%
2013-2014 3.36 127.9 2.63%
2014-2015 3.65 129.5 2.82%
2015-2016 4.07 130.9 3.11%
* Population data sourced from World Bank.
Source: Author calculations on data sourced from incometaxindia.gov.in

Table 3 tells us that only 3.1 per cent of the country's population actually files income tax returns. This figure has constantly been improving. Now let's take a look at what proportion of the country's population which actually pays tax in Table 4.

Table 4:
Assessment year Total number of individuals paying income tax (in Crore) Population (in Crore)* Proportion of population paying income tax
2012-2013 1.25 126.4 0.99%
2013-2014 1.66 127.9 1.30%
2014-2015 1.91 129.5 1.47%
2015-2016 2.06 130.9 1.57%
* Population data sourced from World Bank.
Source: Author calculations on data sourced from incometaxindia.gov.in

Hence, around 1.57 per cent of the country's population paid any income tax in 2015-2016. While a figure of 1.57 per cent sounds atrociously low on the whole, things do not turn out as bad, once we take other factors into account.

Agricultural income is tax free. A bulk of country's workforce is dependent on agriculture for its livelihood. The labour force participation rate of women in case of India is very low, i.e., most women don't work for a living. Over and above this, there are the young and the old, who aren't making any money or enough money for that matter. And India is a young country with a bulk of its population being under 25 years or age. Once we adjust for all these factors the numbers in Table 3 and Table 4 do not look so bad.

Having said that, there are inconsistencies which need to be pointed out. There were only 57,399 individuals who have a returned income of greater than Rs 1 crore. Also, there were only 1,68,318 individuals with a returned income of greater than Rs 50 lakh in the assessment year 2015-2016 (Returned Income is the total income after chapter VI-A deduction and deductions u/s 10A/10AA (wherever applicable)). This is a tad difficult to believe when we look at other data points like the number of luxury cars that Indians buy every year, the number of Indians going abroad etc. Hence, there is a proportion of the population which is not declaring its taxes properly.

Of the 2.06 crore individuals who paid tax, a bulk of taxpayers (around 1.85 crore) paid a tax of less than Rs 1.5 lakh, during the assessment year 2015-2016. Take a look at Table 5.

Table 5: Tax payable less than or equal to Rs 1.5 lakh
Assessment year Number of individuals Total tax paid (in Rs Crore) Average tax paid (in Rs)
2012-2013 1,11,28,419 23,446 21,069
2013-2014 150,64.997 37,107 24.631
2014-2015 1,71,79,474 43,964 25,591
2015-2016 1,84,87,387 44,615 24,133
Source: Author calculations on data sourced from incometaxindia.gov.in

So, the average tax paid by those paying a tax of less than Rs 1.5 lakh was Rs 24,133 during the assessment year 2015-2016. This basically means that the bulk of the tax is being paid by those paying a tax of greater than Rs 1.5 lakh. Let's take a look at Table 6.

Table 6: Tax payable greater than Rs 1.5 lakh
Assessment year Number of individuals Tax paid (in Rs Crore) Average tax paid (in Rs)
2012-2013 13,90,217 91,109 6,55,358
2013-2014 15,82,064 1,02,393 6,47,211
2014-2015 19,18,085 1,47,244 7,67,661
2015-2016 20,85,340 1,43,416 6,87,734
Source: Author calculations on data from www.incometaxindia.gov.in

Now compare Table 5 with Table 6 and it is more or less clear that those paying a tax of greater than Rs 1.5 lakh during the assessment year 2015-2016, even though they are very small in number, paid the bulk of the individual income tax. Now let's take a look at Table 7.

Table 7:
Assessment year Total tax paid by individuals Total tax paid by individuals paying more than Rs 1.5 lakh tax per year Proportion
2012-2013 1,14,555 91,109 79.50%
2013-2014 1,39,500 1,02,393 73.40%
2014-2015 1,91,208 1,47,244 77%
2015-2016 1,88,031 1,43,416 76.30%
Source: Author calculations on data from www.incometaxindia.gov.in

Hence, those paying an income tax of greater than Rs 1.5 lakh, paid 76.3 per cent of the income tax paid by individuals during the assessment year 2015-2016. It would be interesting to see what proportion of the population do they make up for. Let's look at Table 8.

Table 8:
Assessment year Number of individuals who paid an income tax of greater than Rs 1.5 lakh Population (in Crore) Proportion of population Proportion of income tax paid by individuals
2012-2013 13,90,217 126.4 0.11% 79.50%
2013-2014 15,82,064 127.9 0.12% 73.40%
2014-2015 19,18,085 129.5 0.15% 77%
2015-2016 20,85,340 130.9 0.16% 76.30%
Source: Author calculations on data from www.incometaxindia.gov.in

Hence, in the assessment year 2015-2016, 0.16 per cent of the population paid 76.3 per cent i.e. more than three-fourths of the income tax collected from individuals. Indeed, this is worrying. But what is more worrying is that India had only 1,68,318 individuals with an income of greater than Rs 50 lakh in the assessment year 2015-2016. This just doesn't sound right.

Vivek Kaul is the Editor of the Diary. He is the author of the Easy Money trilogy. The books were bestsellers on Amazon. His latest book is India's Big Government - The Intrusive State and How It is Hurting Us.

Disclaimer: The views mentioned above are of the author only. Data and charts, if used, in the article have been sourced from available information and have not been authenticated by any statutory authority. The author and Equitymaster do not claim it to be accurate nor accept any responsibility for the same. The views constitute only the opinions and do not constitute any guidelines or recommendation on any course of action to be followed by the reader. Please read the detailed Terms of Use of the web site.

Recent Articles

In Supporting Demonetisation, RBI Behaved Like an Old Uncle Not Willing to Take a Stand March 13, 2019
The minutes of the meeting of the RBI Board which happened before demonetisation have been released.
Four Economic Indicators Show Economy Has Slowed Down Further Since January 2019 March 12, 2019
For the first time in four years, car sales, two-wheeler sales, tractor sales and commercial vehicles sales, all fell in February 2019.
Why You Shouldn't Buy the Robo-Car Hype March 7, 2019
We are seeing a big revolution in transport. There are the electric cars, autonomous driving, ride shares, etc. What lies ahead of it?
Doubling Farmers' Income by 2022 is Yet Another Modi Jumla March 6, 2019
The actual rate of growth of agriculture is nowhere near what is needed to achieve this.

Equitymaster requests your view! Post a comment on "0.16% of India's Population Pays 76% of Income Tax Paid by Individuals". Click here!

10 Responses to "0.16% of India's Population Pays 76% of Income Tax Paid by Individuals"

RAJESH YADAV

Nov 9, 2018

The entire analysis indicates that the most of the Indian are tax invader and inefficient governence system who are unable to take corrective measure.

Like 

Akand

Jun 17, 2018

Vivek,

when you say 0.16% of the population, you are aware that income tax return filers are usually head of families. Therefore when you compare against total population, you must multiply this 0.16% by the average family size.

So also when you say 3.11% filed returns and then compare against total population, then also you must multiply this 0.16% by the average family size.

If we take average family size as 5.5, then the corresponding figures could be 0.88% and 17.1%.

Am I right?

Rgds

PS: Or you must compare with total number of households, not total population.

Like 

ARJUN MK

Jan 3, 2018

The numbers in Table 2 largely must pertain to the employees below tax limit and medium-level salaried class who manage by making long term investments. They have to record the same for Tax Deduction at Source.

Table 3 and 4 after adjustment for young and old(18-70 years & after adjusting for agriculture income.

Like 

Xavier

Dec 27, 2017

I can see at least 10 cases arround my address who do not pay but earn 50000 to 90000 in a month. they are
the grocesory shop owner, the tailor, (charges about 800 to stich a pant)Iron wallah, car mechanic,two wheeler mechanic,vegetable seller(he moves arround in a cart) Hindu priest etc, They are there in every mohalla in India and transact only thro cash.If any political party touches them that party would be doomed for ever like BJP which is termed as looter of public money.Congress has converted the entire people of the country dishonest and corrupt thro it dishonest and corrupt rule for the last 65 years.every body want the other man to be honest and virtuous. "I wont follow the traffic guide lines but every body else should follow.I will bribe and get things done easily but comment about being honest.etc the list can go on and on.
We are the true followers of "ahimsa"(can tolerate any thing and every thing) as long does not affect us.
I will come back after getting comments about this

Like 

G.Ved

Dec 26, 2017

The analysis is excellent, but to be meaningful analysis data bank needs some more detailssuch as:
Total No. of Earners ,there monthly and annual income. In our country where labour and factory worker gets minimum wages of around Rs.300 per day, what Government can expect to get as Income tax. What is the per capita income in India and in other countries can give some reasonable comparison with other countries. In recent report it has been noted that Income inequality is higher in India than in China. We must think over it also.

Like 

RAVI

Dec 24, 2017

Excellent data. It,s an eye opner for all indians.

Like 

Jayant Gharpure

Dec 24, 2017

The data would have been more meaningful if tax payers were classified according their profession like lawyers finance professionals actors filmmakers stock brokers.

It is hardly believable that there are. Only 10000 taxpayers who return income over 1crore.

It would also interesting to know the income returned under different heads like salary house capital gain other income professional/business income

Quantum of exempt income claimed & deduction claimed u/s 10

by each group of taxpayers

Like 

Bimal Joseph

Dec 22, 2017

Doesn't this mean that there is large amount of black money in our economy? This is exactly the reason why majority of the people supported demonetization irrespective of the hardships they faced and the results.

Like (1)

SANDIP PANDIT

Dec 22, 2017

Very interesting and well researched article. Completely agree with questions raised.
However it is a world of the survival of the smartest, and the smartest in all ranks have the ways to figure out escape routes. It seems the not so smart, which is the majority, get burdened with the formalities of explaining their identity and earnings, and lose out even their earlier status.

Like (1)

TARUN GARG

Dec 22, 2017

I would like to see a table which shows the percentage of Govt employees [Central/State] paying taxes, as tax is deducted at source compulsorily from salary of this category of people.
Also a table which compares not the population but the actual earning population i.e adults above 18 years.
I believe this data would give a more clearer picture of the way Indians pay their taxes.

Like (1)
  
Equitymaster requests your view! Post a comment on "0.16% of India's Population Pays 76% of Income Tax Paid by Individuals". Click here!