SBI Research: Deciphering emerging Trends in ITR Filing [Download Pdf]

The SBI Research Data unveils very shocking revelation. Trends in ITR Filing have changed. ITR Fillers with No Tax Liability double in past 3 years.

We took a deep dive into what lies beneath the huge treasure trove of IT returns data, that capture and reflect the state of affairs of a society as it aspires to Dream more, Do more, Want more, and Achieve MORE together, as we celebrated the 77th Independence Day, emboldened by the idea of a new India taking wings, ready for the leap of faith to stake claim for a rightful position on a world stage being rescripted constantly by myriad conflicting forces.

Deciphering the data, we understand there is a great story in the making as the Ascent of the Great Indian Middle Income Class is all too visible, poised to propel the country into a Middle Income Economy cohort going forward as the tax filer base, aided by ongoing reforms and confidence building measures coupled with a galvanising economy firing on all cylinders, promises to bring to the net 482 million IT filers in FY47 (70 million in FY23), increasing its sharability. The formalisation push of almost 70 million MSMEs promises to appropriately broaden the population.

By FY47, 25% of ITR filers are predicted to leave the lowest income bracket (up from 13.6% between AY12 and AY23).

Analysing IT Returns for insights in Emerging Trends

Data has been taken from Income tax Dashboard. Data considered here is taken from March 2012 to March 2023 for AY12 to AY23. i.e ITR filed during 01/04/2011 to 31/03/2012, 01/04/2012 to 31/03/2013, ….and 01/04/2022 to 31/03/2023.

For AY 24, ITR wise and State wise break ups are not available, so that AY 24 is not considered for State wise and ITR type wise analysis. As per World Bank estimate, 161 crore population is estimated for India at FY47.

As per UN working age population (15-64 years) is expected to peak in 2040 and decline thereafter. Close to 22% workforce is projected to be engaged in agriculture in FY47. Workforce engaged in activities other than agriculture is considered as workforce with taxable base /Taxable Workforce.

Total income tax returns filed during AY23 increased to 78 million from 73million in AY22. Of these, total 58 million or 75% of the returns were filed on or before the due date. 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. For AY24, 68 million ITRs have been filed by the due date and another 18-20 million returns are expected to be filed in the remaining financial year till Mar’24, thereby taking the total number close to/over 85 million / ~37% of formalized labor force.

For AY24, we believe the share of IT returns filed after due date may drop to around 20%. This reveals the discipline among tax-payers along with the simplification of IT forms and processes driven by constant efforts of CBDT to build an efficient, digital-heavy filing, verification and return architecture sans hassles.

42% filers are in ITR-1

When comparing the types of ITRs submitted, AY23 witnessed an increase in ITR-2 filings to 10.3% from 8.6% the previous year. In AY23, ITR-1, ITR-3, and ITR-4 made up 42.3% (43.4% in AY22), 16.1% (16.5% in AY22), and 27.4% (27.4% in AY22), respectively.

In the current financial year, the maximum or 55% of the returns available for 13.6 million are ITR-1, followed by 29% ITR-4, 8% ITR-2, and 7% ITR-3. According to past year trends, the smaller proportion of ITR-3 filed thus far shows that those with business income make up the majority of those who file the reports late (with fine).

Decline in Zero-tax liability filers

Zero tax liability has decreased significantly, with their percentage of total returns filed decreasing to 64% in AY23 from 84.1% in AY12….Juxtaposing the same with recent buoyancy in tax fling numbers and calibrating with migratory patterns emerging as the majority of the working population seeks suitable opportunities across the vast country could assist policymakers in formulating next level measures as the economy prepares to take the leap of faith.

To Read More Download PDF Given Below: