A mostly invisible pyramid: What Indians earn remains a well-known unknown

What surveyed homes say they consume will no longer be all we have to estimate poverty by, and GDP per capita could be pushed back in the box of what exactly it tells us: national output per head. For businesses and investors focused on India as an emerging market, what people at large earn is not as relevant as the earnings of those in the upper zones of our vast pyramid. 

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A fairly clear snapshot of this part, one with its accuracy backed if not assured by law, is captured every year by the Income Tax Department. In 2023-24, almost 75.5 million tax returns were filed by individuals for the previous year’s income. The vast bulk of these tax-filers were in brackets up to ₹15 lakh and about 7.2% were in higher slabs up to ₹50 lakh, with less than 0.7% in the slab from ₹50 lakh to ₹1 crore  and under 0.3% in the one from ₹1 crore to  ₹5 crore. 

At still higher levels, 16,622 taxpayers declared an income of over ₹5 crore, a count that includes 23 at the very top who earned over ₹500 crore. All added up, tax return filers in India said they earned nearly ₹61.8 trillion  in 2022-23, an average of ₹8.2 lakh. Official data is still awaited on returns filed in 2024-25 for 2023-24. 

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Given how digital trackers have made taxes significantly harder to evade, we can assume these numbers reflect reality better than ever before. With a revised Income Tax law set to come into force from 2026-27 onwards, authorities will gain access to ‘virtual digital spaces’ for search and seizure operations, which is likely to deter evaders even further. 

Returns filed next year for income in 2025-26 will be of special interest, given this year’s  budgetary rejig of tax rates. In a nudge for  people to adopt the simplified new regime, income of up to ₹12 lakh is tax-free under it, since a flat ₹60,000 rebate nullifies what’s due up till that slab. Given that this regime’s ‘basic exemption’ cap is far lower, set at ₹4 lakh, and the law requires returns filed by everyone earning above that figure, the government will not suffer much of a data loss.

Also Read: All-India income survey: Let’s not miss this opportunity to get it right

So, while India’s base of actual taxpayers is bound to shrink, as the bulk of our tax-paying pyramid will no longer face any liability, we need not worry about our visibility being reduced to just the relatively well-off—or the top one-tenth or so of our return-filers.

That’s a relief, since it’s essential to track income levels over the next two decades. Note that in most developed countries, a majority of working-age adults pay direct taxes on what they earn. It empowers the state to meet welfare, security or other national aims. For India to get within striking range of such fiscal comfort, what people earn must rise rapidly above the ₹1 lakh-per-month mark from here on. 

How many make the cut in 2025-26, we’ll know only next year. But even if our real taxpayer base does not drop below 10 million,  it would be a far cry from the 1.1 billion odd  working-age adults we might have by 2047, as derived from an age-wise population forecast of the United Nations. As goals go, that looks rather steep, but it mustn’t daunt us.