NEW DELHI: Income disparity has declined by over 74.2% between fiscal year 2013-14 and 2022-23 for those earning up to Rs 5 lakh annually, according to a report by the State Bank of India.
The study noted that the lower-income group, defined as those earning less than Rs 5.5 lakh, has experienced positive growth rates over the past decade, with the exception of AY20, which was impacted by the Covid-19 pandemic.
“Our analysis shows that there has been a cumulative 74.2% decline in income disparity coverage for those earning up to Rs 5 lakh. This shows the continuous efforts of Govt are reaching the bottom of pyramid – that is leading to increase in income of ‘lower income group’ people,” the report titled ‘How Tax Simplification has given a necessary fillip to ITR Filing’ said.
The report, however, comes in contrast with the Oxfam India’s ‘Survival of the Richest’ report that had painted a rather bleak of income inequality in the country.
As of 2021, the wealth disparity in India is stark, with the top 1% owning over 40.5% of the country’s total wealth, while the bottom 50% of the population—around 700 million people—holds just about 3%. Since the onset of the pandemic through November 2022, Indian billionaires have seen their wealth skyrocket by 121%, translating to an astonishing increase of INR 3,608 crore per day, or approximately Rs 2.5 crore every minute, the report had said.
The SBI report further said that for individuals earning up to Rs 3.5 lakh, their share of income disparity has decreased from 31.8% in FY14 to just 12.8% in FY21. This indicates a substantial 19% increase in their income share compared to their population size.
Additionally, traditional income tax leaders such as Maharashtra, Delhi, Gujarat, and Karnataka are approaching saturation in Income Tax Return (ITR) filings, leading to a continuous decline in their share of the overall tax base. In contrast, Uttar Pradesh has emerged as the leader in increasing its share of the income tax filing base, followed by Bihar, Andhra Pradesh, Punjab, and Rajasthan.
The report also highlighted a shift towards a more progressive taxation regime. The contribution of direct taxes to total tax revenue rose to 56.7% in AY24, up from 54.6% in AY23, marking the highest level in 14 years. The direct tax to GDP ratio also increased to 6.64% in AY24, the highest since 2000-01, reflecting improved tax compliance.