# Who actually pays income tax in India? > The zero-tax majority is not evasion but a deliberate policy choice that keeps lifting the nil-tax ceiling. The burden rests on a tiny apex. **Only 3 crore returns pay income tax out of nearly 8 crore filed** About 7.97 crore income-tax returns were analysed for AY2023-24, but 61.6% owed nothing. Only 3.06 crore actually paid any tax. The zero-tax share jumped sharply in AY2020-21 when the Section 87A rebate made income up to ₹5 lakh tax-free. Since then policy changes have raised the nil-tax ceiling to ₹12 lakh (effective AY2026-27), so the true zero-tax share is likely higher. The tax that is collected is intensely concentrated: about 91,000 returns (0.1% of filers) paid 58.1% of all income tax. Personal income tax now exceeds corporate tax by nearly ₹2.5 lakh crore. The system has become more progressive, with direct taxes rising to 58.8% of central revenue, and the cost to collect ₹100 of direct tax has fallen to just ₹0.41. ## How many people who file income tax returns actually pay anything? Out of 79.71 million returns analysed for AY2023-24, 61.6% owed nothing. That is roughly 49.1 million filers whose tax payable was zero. Only about 30.57 million returns had any tax to pay. Filing a return is not the same as paying tax. The zero-tax share was already 55.6% in AY2012-13. It jumped sharply in AY2020-21 when the Section 87A rebate made total income up to ₹5 lakh effectively tax-free. That single policy change moved the share from around 40% to roughly two-thirds in one year. Millions of salaried workers, pensioners, and small business owners with honest incomes below ₹5 lakh suddenly owed nothing. So the majority-zero is legal exemption, not evasion. The data ends at AY2023-24, before the nil-tax ceiling was raised to ₹7 lakh (2023) and then ₹12 lakh (2025). The true zero-tax share now is almost certainly higher. ## At what income level does someone start paying income tax, and how has that changed? The income at which tax becomes nil has been lifted again and again by Parliament. In AY2013-14, you could earn ₹2 lakh before paying any tax. By AY2020-21, the rebate pushed the ceiling to ₹5 lakh. The Interim Budget 2019 raised the rebate to ₹12,500, making incomes up to ₹5 lakh tax-free. Budget 2023 made the new regime the default and lifted the ceiling to ₹7 lakh for AY2024-25. Budget 2025 raised it again to ₹12 lakh, effective from AY2026-27. For a salaried person, the standard deduction lifts it further to about ₹12.75 lakh. Each step was a policy choice, not an accident. And each step mechanically enlarged the share of zero-tax filers. The ₹4.5 lakh to ₹5 lakh income band is the single biggest cluster of returns, with millions parked just under the cliff where tax becomes zero. Since our return-level data ends at AY2023-24, the 61.6% zero-tax share is a floor, not a ceiling. ## If most filers owe nothing, how does the taxpaying base compare to total filers? The headline filing number is 79.71 million returns. But only 30.57 million returns actually pay any tax. The gap of over 49 million has widened over the years. In AY2012-13, 31.19 million returns were filed and 13.84 million paid tax. Filing has more than doubled but the paying base has only doubled. The true taxpayer base is about 3 crore, not 8 crore. That is roughly the number of households that carry the entire income tax. The rest are part of a widening return-filing habit, encouraged by policies like making filing mandatory for certain transactions, but they are out of the tax net by design. The gap will likely widen further as the nil-tax ceiling rises to ₹12 lakh. ## Who carries the heaviest burden of income tax? A vanishingly small group. In AY2023-24, about 91,000 returns, 0.1% of all filers, each owed more than ₹1 crore in tax. Together they paid 58.1% of all income tax. The other roughly 3 crore returns that paid any tax split the remaining 41.9%. Returns reporting gross total income above ₹1 crore held 45.4% of all declared income. The concentration has eased slightly: in AY2012-13, the top >₹1 crore group paid 65.9% of the tax. The broadening base of small taxpayers has diluted the apex share, but it remains extreme. Income tax in India is not a broad-based levy. It rests on a needle point, and that point is getting ever sharper in absolute terms. ## Has the income-tax burden shifted from companies to individuals? Yes, and the crossover is stark. In FY2000-01, corporate tax collections were ₹35,696 crore and personal income tax was ₹31,764 crore. For years, companies paid more. But in FY2020-21, personal tax overtook corporate tax. By FY2024-25 (provisional), personal tax reached ₹12.4 lakh crore against corporate tax of ₹9.9 lakh crore, a gap of nearly ₹2.5 lakh crore. One trigger was the steep corporate tax rate cut in September 2019, which slashed rates for existing companies to 22% and new manufacturing to 15%. That reduced corporate collections just as personal tax kept growing with formalization and higher incomes. The personal tax head includes not just individuals but HUFs, trusts, and other non-corporate entities, so it is slightly broader than pure individual tax. But the direction is clear: the tax burden has shifted decisively onto people. ## What kind of income do individual taxpayers declare: salary, business, or capital gains? For individual taxpayers, salary is the largest source. In AY2023-24, they declared ₹35.2 lakh crore in salary income, up from ₹8.3 lakh crore in AY2013-14, a 4.2-fold rise. Business income declared by individuals was ₹16.7 lakh crore, up 3.6-fold from ₹4.7 lakh crore. But the fastest-growing stream is long-term capital gains, which jumped from ₹28,686 crore to ₹2.5 lakh crore, nearly a 9-fold increase. That surge reflects deeper equity markets, more retail investing, and some profit-booking. The individual income mix is still dominated by salary, but capital gains are climbing fast, especially at the top. These are individual-only figures; adding companies would inflate business and capital gains, but the story of the individual taxpayer is that salary still pays the bills, and capital is becoming a larger second income. ## Is the tax system becoming more progressive over time? Direct taxes, which fall on income and profits, are generally more progressive than indirect taxes like GST that fall on spending. In FY2000-01, direct taxes made up 36.3% of central tax revenue. By FY2024-25, that share had risen to 58.8%. The only major dip was the COVID year. This 25-year tilt means the state relies more on taxing those who can pay, rather than those who must spend. But how progressive this really is depends on who within the direct-tax category bears the load. As we have seen, personal income tax is itself concentrated at the top, while corporate tax is a mixed bag. Still, the direction is towards progressivity, and that is consistent with the policy of exempting the bottom. ## How efficiently does India collect its income tax? In FY2000-01, it cost the tax department ₹1.36 to collect ₹100 of direct tax. By FY2024-25, that cost had plummeted to ₹0.41. That is one of the cheapest collection costs in the world. The big efficiency gains came from digitisation: e-filing, pre-filled returns, and the expansion of TDS (tax deducted at source) on salaries and interest. Salaried workers have their tax deducted by employers before they see the money, which is almost costless to collect. The low cost also reflects a narrow base concentrated among formal-sector employees. A broader tax net with more self-employed and informal workers might cost more. So cheap collection is not automatically a sign of a perfect system; it is partly a sign that the department is collecting from the easiest targets. ## How does India's overall tax collection compare to other countries? India's general government tax revenue is 17.3% of GDP, including social contributions (which are near-zero). That is mid-low. Wealthy economies like Germany (37.5%), the UK (34.9%), and even Brazil (32.7%) collect far more. China collects 22.1%, the US 24.8%, South Africa 28.1%. India is above Indonesia (10.3%) and Bangladesh (7.3%). The gap with European countries is partly structural: they have large payroll taxes to fund pensions and health, while India runs a minimal social security system. But even among Asian peers, India's tax effort is moderate. A tax-to-GDP of around 17% means the state has limited resources relative to the size of the economy, which is one reason why public spending on health and education remains low. ## How narrow is India's personal income tax base compared to the world? Personal income tax as a share of GDP is a direct measure of how widely the income-tax net is cast. India's PIT-to-GDP is 3.7%. The OECD average is 8.2%. That gap is vast; rich countries typically raise 5-12% of GDP from individual income tax. But in Asia, India's effort is not unusually low. The Asia-Pacific average is 3.6%, almost identical. China raises only 1.1% of GDP from personal income tax, Philippines 3.1%, Singapore 2.5%, Indonesia 1.1%. India sits right on the regional norm. What is unusual is not the low effort but the extreme concentration within that 3.7%, almost three-fifths paid by 0.1% of filers. So the narrow base is a double story: low overall, and hyper-concentrated among the few who pay. ## Sources - Data from CBDT Income Tax Return Statistics, Time-Series publications, and Finance Acts (for nil-tax ceiling). - International comparisons from UNU-WIDER/ICTD Government Revenue Dataset (tax-to-GDP) and OECD Revenue Statistics in Asia-Pacific; India’s PIT-to-GDP from CBDT. - All ITR figures are for assessment year (AY), which taxes income earned in the previous financial year. Return-level data covers returns that pass CBDT consistency checks, not every single return filed. --- Source: [This Indian Life](https://thisindianlife.today/articles/who-actually-pays-income-tax-in-india/) · Updated 2026-06-05. Licensed CC BY 4.0. Please cite as "This Indian Life — https://thisindianlife.today".