New Delhi: In the ten years since Prime Minister Narendra Modi took office, India has seen a dramatic transformation in its income tax landscape. Under the Modi regime, tax policies have aimed at reducing the burden on middle-class earners while increasing accountability and contribution from high-income individuals. This shift is evident in a substantial increase in income tax filers with earnings above ₹50 lakh and a significant decrease in tax liability for middle-class families. Let’s break down the numbers and understand what this means for the Indian taxpayer.

1. The Rise of High-Income Tax Filers

According to income tax return (ITR) data, the number of individuals declaring an annual income of over ₹50 lakh has skyrocketed from just 1.85 lakh in 2013-14 to more than 9.39 lakh in 2023-24. That’s an impressive five-fold jump! These high-income earners now contribute a whopping 76% of the total income tax revenue collected by the government.

What’s Driving This Spike?
The Modi government’s crackdown on tax evasion and black money has pushed high-income individuals to comply with tax regulations. By implementing stringent anti-evasion laws, the government has successfully widened the tax net, ensuring that wealthier citizens pay their fair share.

2. Reduced Tax Burden on the Middle Class

The middle class, often defined as individuals earning less than ₹20 lakh annually, has seen a decrease in tax liability over the past decade. This shift can be attributed to various exemptions, deductions, and adjustments introduced by the government, such as raising the income threshold for tax exemptions and simplifying tax slabs.

Key Changes for Middle-Class Taxpayers:

• Higher Exemption Limit: In 2014, any income above ₹2 lakh was taxable. Today, thanks to the Modi government’s reforms, individuals earning up to ₹7 lakh can avoid taxes entirely under certain conditions.
• Lower Tax Rates for Lower Income Brackets: Taxpayers earning between ₹2.5 lakh and ₹7 lakh faced an average tax burden of ₹43,000 in 2023-24. This is roughly 4-5% of their income, one of the lowest tax burdens for this income group among emerging economies.

3. Shift in Tax Burden: Lower for Middle Class, Higher for the Wealthy

In 2014, those earning under ₹10 lakh contributed about 10.17% of the total income tax collection. Fast forward to 2024, and this percentage has dropped to just 6.22%. Meanwhile, high-income earners have taken on a larger share of the tax burden. This realignment reflects the government’s vision of supporting the middle class while ensuring that the wealthy contribute a fairer share.

4. Inflation-Adjusted Relief for the ₹10-20 Lakh Income Bracket

For those earning between ₹10 lakh and ₹20 lakh, the Modi government’s reforms have provided additional relief when adjusted for inflation. Over the past ten years, the effective tax liability for this group has decreased by almost 60%, offering substantial financial breathing room for India’s aspirational middle-income families.

5. Doubling of Total ITR Filers

The overall number of individuals filing income tax returns has increased from 3.60 crore in 2013-14 to 7.97 crore in 2023-24 – an impressive 121% increase. This growth reflects an expanding taxpayer base, driven in part by the government’s tax compliance initiatives, digitization of filing processes, and incentives for transparency.

Why It Matters: A Fairer Tax System, a Stronger Economy

The Modi government’s tax policies have aimed to create a fairer system that alleviates the burden on middle-income earners while ensuring that high-income individuals contribute their share to nation-building. The reforms have promoted transparency, widened the tax net, and ultimately driven up revenue without overburdening the middle class.

Key Takeaways:

• High-Income Contribution: Tax filers earning above ₹50 lakh now make up 76% of total tax revenue.
• Middle-Class Relief: Tax exemptions and deductions have significantly reduced the tax burden for individuals earning under ₹20 lakh.
• Increased Compliance: Strong anti-evasion measures have led to a five-fold increase in high-income tax filers.
• More Taxpayers: The number of ITR filers has doubled, promoting a broader tax base.

As the Modi government completes a decade in power, these tax reforms underscore its commitment to making India’s tax system fair, progressive, and growth-oriented. The aim is to empower the middle class, encourage compliance among high earners, and strengthen the country’s economic backbone.

Disclaimer: This article is intended for informational purposes only and should not be taken as financial advice.