VISAKHAPATNAM: Andhra Pradesh led the nation in adding the highest number of new tax filers, 18 lakh, between assessment year 2020 and AY 2023, according to the State Bank of India's recent report titled "deciphering emerging trends in ITR filing: the ascent of the new middle class in circular migration."
Maharashtra (13.9 lakh), Uttar Pradesh (12.7 lakh), and Gujarat (8.8 lakh) followed closely behind in second, third, and fourth place, respectively. Telangana experienced negative growth during this period, ranking 20th among all states.
Compared to other states in the South like Karnataka, Tamil Nadu and Kerala, which each added an average of 3-4 lakh new ITRs, Andhra Pradesh experienced a significant surge. This could be partially attributed to the formalisation of its MSME (micro, small and medium enterprises) sector.
This hypothesis gains some support from the fact that the top five states contributing to 60% of the total increase in ITR filing also accounted for 45% of all Udyam registrations (the official government platform for MSME registrations). Notably, Andhra Pradesh saw 6.6 lakh Udyam registrations and 4.1 lakh GST registrations during this period.
It is important to note, however, that ITR filing relies on the PAN card address, which may not accurately reflect the individual's current place of work.
25% of ITR filers may leave lowest income stratum by ’47
This data can therefore be furtheranalysed through the lens ofmigrations. For example, theITR of an employee working in Bengaluru or Chennai might still be countedunder AP’s quota if they have obtained their PAN card while residing there as a student or employee.
Thousands, or even lakhs, of employees originally from Andhra Pradesh but currently working in other states mightstill be filing their ITRs under AP’s quota because their PAN card addressesreflect their native state.AP state finance commissionmember Prof M Prasada Rao said thatITR filings have seen a consistent upswing in recent years, fuelled primarily by rising economic growth and increasing per capita income.
“As per official statistics, AP’s percapita income jumped from `1.5 lakhto `2.2 lakh in the last four years. While the Covid-19 pandemic impacted filings in 2020 and 2021, the trend resumed with rising salaries, new entrepreneurs, and individuals in the gigeconomy contributing to a wider taxbracket,” said Prof Prasada Rao.According to SBI’s report, 25% ofITR filers are expected to leave the lowest income stratum by 2047.
Around17.5% filers may shift to `5-10 lakh income group, 5% to `10-20 lakh group,and 3% to `20-50 lakh group by 2047.About 0.5% of the filers may fall into`50 lakh – 1 crore group and 0.075% into above `1 crore group by 2047.Vizag based tax consultant Sunkara Srinivas said individuals do not have to pay tax if their taxable incomedoes not exceed `7.5 lakh, includingstandard deduction of `50,000, in a financial year under new tax regime.
“This might have also encouraged more people to file ITRs. The increasingtax returns might not always translate to everyone paying their rightfultaxes as there would be different reasons for the filings,” said Srinivas.
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