In FY20, there were 3.79 crore people who paid income tax. This number declined to 1.51 crore in FY23. The decline was most pronounced in the case of people who earned between Rs. 2.5 lakh and Rs. 5 lakh. The number of people in this income bracket who paid income tax declined by 85% in FY23.
There are a number of factors that could have contributed to this decline, including the economic slowdown caused by the COVID-19 pandemic, the rise in the threshold for filing income tax returns, and the government’s focus on increasing the number of people who file income tax returns rather than collecting taxes from those who already do.
The decline in the number of people who actually pay income tax is a matter of concern. It means that the government is losing out on revenue that could be used to fund essential services. The government needs to take steps to address this issue, such as simplifying the tax filing process and increasing the penalties for non-compliance.
Yes, that is correct. According to data released by the Ministry of Finance in the Lok Sabha, the number of people who actually paid income tax in India declined by 60% in the financial year 2022-23 (FY23) compared to FY20.
In FY20, there were 3.79 crore people who paid income tax. This number declined to 1.51 crore in FY23. The decline was most pronounced in the case of people who earned between Rs. 2.5 lakh and Rs. 5 lakh. The number of people in this income bracket who paid income tax declined by 85% in FY23.
There are a number of factors that could have contributed to this decline, including the economic slowdown caused by the COVID-19 pandemic, the rise in the threshold for filing income tax returns, and the government’s focus on increasing the number of people who file income tax returns rather than collecting taxes from those who already do.
The decline in the number of people who actually pay income tax is a matter of concern. It means that the government is losing out on revenue that could be used to fund essential services. The government needs to take steps to address this issue, such as simplifying the tax filing process and increasing the penalties for non-compliance.
Here are some of the possible reasons for the decline in the number of people who paid income tax in India in FY23:
- The economic slowdown caused by the COVID-19 pandemic: The pandemic has led to a decline in economic activity, which has resulted in a decline in incomes for many people. This has made it difficult for some people to meet their tax obligations.
- The rise in the threshold for filing income tax returns: The threshold for filing income tax returns was raised from Rs. 2.5 lakh to Rs. 5 lakh in FY23. This means that fewer people are now required to file income tax returns.
- The government’s focus is on increasing the number of people who file income tax returns rather than collecting taxes from those who already do: The government has been focusing on increasing the number of people who file income tax returns. This has led to a decrease in the focus on collecting taxes from those who already do.
The government needs to take steps to address this issue. Some possible measures include:
- Simplifying the tax filing process: The tax filing process should be made simpler and easier to understand. This will make it easier for people to file their taxes and reduce the number of errors.
- Increasing the penalties for non-compliance: The penalties for non-compliance should be increased. This will discourage people from not paying their taxes.
- Improving taxpayer education: The government should improve taxpayer education. This will help people understand their tax obligations and make it more likely that they will comply with the law.