The share of individual return filers with annual tax liability of Rs 5 lakh and above has shown a consistent increase in recent assessment years, reflecting rising incomes, improved tax compliance, and greater formalisation of the economy. According to data from the Central Board of Direct Taxes (CBDT), the share of individuals with Rs 5 lakh or more tax liability grew from 2.92% in assessment year (AY) 2022-23 to 4.4% in AY 2025-26 (filings up to December 31).
In absolute terms, 2.1 million out of 72.3 million individual return filers had tax liability of Rs 5 lakh or above in AY 2022-23, while 43.7 million individual filers had zero tax liability. In AY 2023-24, the share rose to 3.32%, with 2.6 million out of 78.5 million filers having tax liability of Rs 5 lakh or more.
In AY 2024-25, it increased to 3.7%, with 3 million out of 82.1 million filers in this category. The share further rose to 4.4%, with 3.5 million out of 80 million individual return filers till December 31 in AY 2025-26. However, the year-on-year growth in the number of individual return filers with Rs 5 lakh or more tax liability has shown a declining trend, from 23.36% in AY 2023-24 to 16.12% till December 31 in AY 2025-26.
An tax expert said the increase in the share of individuals with a tax liability of Rs 5 lakh or more reflects structural changes in India’s tax ecosystem rather than a rise in tax burden alone. The trend is largely driven by rising income levels, particularly among salaried professionals and business owners, which has resulted in more taxpayers moving into higher income brackets, he said.
What do subject matter experts say?
Another tax expert said the steady rise reflects a combination of income growth, greater formalisation of the economy, and improved tax compliance. “Enhanced reporting systems introduced by the Income Tax Department and expanded third-party data reporting are making incomes more visible in the tax system.
This trend suggests that India’s tax base is not only widening in terms of the number of filers but also deepening as a larger proportion of taxpayers move into higher tax-paying brackets,” he said. Sharma also noted that the tax department’s increasing use of AI-driven analytics and automated risk assessment tools is significantly enhancing its ability to detect discrepancies.
“Additionally, increased formalisation of the economy, supported by reforms such as GST, has brought more individuals and businesses into the formal tax framework,” he said. He added, however, that despite the increase, such taxpayers still represent a relatively small share of the overall population, suggesting that India’s tax base continues to have scope for further expansion.
Source from: https://www.financialexpress.com/business/news/2-1-mn-individuals-now-have-tax-liability-above-rs-5-lakhnbsp/4174788/
