Syllabus: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.
Context and Structural Shift
- India’s direct tax system has expanded significantly over the last decade.
- Growth reflects deeper formalisation rather than temporary compliance spikes.
- Expansion accompanied by improved tax administration efficiency.
Overall Growth in Taxpayer Base
- Total taxpayers rose from 5.26 crore (AY 2013-14) to 12.13 crore (AY 2024-25).
- Taxpayer definition includes return filers and persons under TDS coverage.
- Base more than doubled over eleven years.
- Recorded CAGR of about 7.89%, indicating sustained expansion.
- Considered a major structural shift since PAN system expansion.
Growth in Individual Taxpayers
- Individuals remain the largest contributors to tax base expansion.
- Numbers rose from 4.96 crore to 11.61 crore.
- Growth recorded around 8% CAGR during the period.
- Pre-pandemic years saw steady high single-digit increases.
- AY 2020-21 witnessed nearly 9% decline due to COVID disruption.
- Post-pandemic years showed double-digit recovery and renewed momentum.
Non-Individual Taxpayer Trends
- Includes firms, companies, HUFs, AOPs, BOIs, and local authorities.
- Base rose from 0.29 crore to 0.48 crore.
- Growth recorded around 5% CAGR.
- Pre-pandemic expansion ranged between 4–7% annually.
- Pandemic year growth fell below 1%.
- Recovery remained gradual, stabilising near 5% growth.
Improvement in Tax Administration Efficiency
- Cost of direct tax collection declined sharply.
- Fell from 1.36% (FY 2000-01) to 0.41% (FY 2024-25).
- Pandemic caused temporary cost increase.
- Ratio later reached the lowest recorded level.
Drivers of Administrative Gains
- Adoption of digital filing systems streamlined compliance.
- Introduction of pre-filled returns reduced taxpayer burden.
- Faceless assessments improved transparency and speed.
- Expanded third-party information reporting strengthened monitoring.
Broader Fiscal Significance
- Tax mobilisation now draws from a wider taxpayer base.
- Strengthens revenue stability and fiscal sustainability.
- Reinforces taxation’s role in the formal economy.
Conclusion: India’s expanding taxpayer base alongside rising efficiency marks a durable strengthening of the direct tax system.