India gains over 100,000 new crorepati taxpayers in 3 years
India's high-income taxpayer base has grown tremendously over the last decade, with the number of people earning over ₹1 crore in taxable income increasing five-fold. The trend has been particularly pronounced since the COVID-19 pandemic, with over 1 lakh new taxpayers entering this elite club in just three years. India is now home to over 220,000 people with a taxable income of over ₹1 crore.
Factors contributing to the rise of high-income taxpayers
The rise in high-income taxpayers can be attributed to a booming stock market, strong corporate profits, and hefty salary hikes. Changes in tax rules, particularly those concerning dividend taxation at the individual level, also contributed. R Prasad, former chairman of the Central Board of Direct Taxes (CBDT), noted that many big companies continued to do well and the stock market remained strong during the pandemic.
Tax department's role in identifying high-income taxpayers
Sudhir Chandra, another former CBDT chief, stressed the income-tax department's role in identifying high-income taxpayers. He said meticulous data matching of disclosures made by taxpayers in their returns of investment (RoI) has greatly contributed to the rising number of individuals moving to the crorepati-taxpayer bracket. The department quickly issues notices whenever a mismatch between reported earnings and taxes paid is detected.
Demand for talent and market performance boost high incomes
Vikas Vasal, National Managing Partner of Tax at Grant Thornton Bharat, observed that there is a demand for talent with requisite experience and skills in rapidly expanding industries. He added that many senior executives have greatly benefited from a surging stock market. Ranen Banerjee, Partner and Leader of Economic Advisory at PwC India, noted that the post-COVID-19 resignation wave forced companies to increase remuneration by 20-30% mid-year, pushing several salaried income taxpayers above the crore mark.
Investment gains and tax changes drive high-income growth
Sudhir Kapadia, Senior Advisor at EY, flagged abnormally large investment gains from a booming capital market as a key factor. He also pointed out that the new wave of crorepati taxpayers includes legacy investors, fresh entrants in the futures and options space, successful start-up founders, and executives in select companies/sectors. Changes in dividend taxation have also contributed significantly to pushing people into the ₹1 crore-plus tax bracket.
Future trajectory of India's high-income taxpayer base
The future course of India's high-income taxpayer base is a matter of debate among experts. Banerjee of PwC India thinks as wages in the services sector match global benchmarks, the pool of ₹1 crore-plus income taxpayers will keep growing. Vasal is optimistic too, saying strong economic activity and sustained GDP growth will drive this. However, former CBDT chief Prasad expects "the trend is bound to plateau," with little room for growth at this pace.
