Target of 482 million Tax filling by 2047 from existing 70 million

Government believes that income tax filings will increase multifold from the current level of 70 million to 482 million by 2047. For this to become a reality, the total annual income tax return filings would need o touch around 149 million over the next nine years, based on the growth rate that this would imply.

This means an additional 76 million annual tax filers by FY2032, or more than the filing seen on an annual basis currently, over seven decades after the Independence. This assumes a lower growth rate than that seen in recent years, though employment opportunities for a rising working-age population and commensurate growth in income would also be required for this to play out.

The rise in previous years’ tax return filing shows that such growth rates have been achieved in the past. The compound annual growth rate between FY2014 and FY2023 was 8.5 per cent. The finance ministry target would imply a growth of 8.2 per cent.

Income tax filers would be nearly half a billion by 2047, according to the finance ministry. This would mean crossing the 100 million mark by FY2027, 200 million by FY2036, 300 million by FY2041, and 400 million by FY 2045.

An analysis of United Nations population projections shows that India will have sufficient people of working age by 2047. There should be over a billion people between 15-64 years of age by 2047 and they will account for 68 per cent of India’s total population. The share of the working-age population is expected to peak in 2032, when it hits around 69 per cent.

Some of the recent gains in ITR filing have been driven by increased formalization. This means that people in the informal economy who were of a certain income bracket are now also filing tax returns. The incremental gains may have to come from rising incomes and more people getting jobs with sufficient pay that they are required to pay tax.

Another key factor to meet the tax target may be to get more women into the workplace. India’s female labour force participation rate which measures the share of working women of those looking for employment, is 24 per cent. It is greater than 50 per cent in each of the other major emerging market peers with similar demographic profiles – Brazil, Russia, and China.