Who Really Pays India’s Taxes?Looking Beyond Rising Income-Tax Returns, Corporate Tax and GST Collections

India’s tax collections have undergone a remarkable transformation over the past few years. Two developments stand out. First, personal or non-corporate income-tax collections have overtaken corporate tax collections. Second, Goods and Services Tax (GST) collections have grown substantially.

At first sight, these trends may suggest a simple conclusion: individuals are increasingly carrying a larger share of the country’s tax burden. But taxation statistics require a closer look. The number of income-tax returns filed is not the same as the number of people actually paying income tax; business turnover is not the same as taxable income; and rising GST collections do not necessarily mean that GST rates or the effective burden on each consumer have risen proportionately.

The more meaningful question, therefore, is: as India’s tax revenues expand, who is actually carrying the incremental burden?

The Reversal Between Corporate and Non-Corporate Tax

The change in direct-tax collections is striking. See Fig 1.

In FY2018-19, corporate income-tax collections were approximately ₹6.64 lakh crore, compared with around ₹4.73 lakh crore from personal income tax. Corporate tax collections were therefore about 40 per cent higher.

By FY2025-26, the position had reversed. Corporate tax collections stood at approximately ₹10.99 lakh crore, while non-corporate tax collections were around ₹12.41 lakh crore. Thus, the latter exceeded corporate tax collections by about 13 per cent.

FY	Corporate tax	Personal income tax*	Difference
2018-19	₹6.64 lakh cr	₹4.73 lakh cr	Corporate +40%
2020-21	₹4.58 lakh cr	₹4.88 lakh cr	Personal +6.5%
2023-24	₹9.11 lakh cr	₹10.45 lakh cr	Personal +14.7%
2024-25	₹9.87 lakh cr	₹12.35 lakh cr	Personal +25.2%
2025-26	₹10.99 lakh cr	₹12.41 lakh cr	Personal +12.9%

                                                        Fig 1

The underlying reversal is supported by the Government’s direct-tax collection statistics.

This does not mean that corporate India has contracted or that corporations have stopped paying tax. Corporate tax collections themselves have risen substantially. One relevant structural change was the major reduction in corporate tax rates announced in September 2019. Therefore, slower growth in corporate tax receipts relative to non-corporate tax should not automatically be interpreted as evidence of weaker corporate activity.

What is nevertheless significant is the changing composition of direct taxation. A larger amount is now being collected on the non-corporate side than from companies.

There is also a terminology issue worth noting. What is commonly described as “personal income tax” should not be interpreted as tax paid exclusively by salaried individuals. The non-corporate category encompasses a broader universe of taxpayers and income sources. Consequently, comparing corporate tax with this category does not, by itself, establish that salaried employees now pay more tax than corporate India.

Tax Returns Are Not the Same as Tax-Paying Returns

One argument commonly advanced to explain rising personal income-tax collections is that India’s income-tax base has widened substantially.

That is certainly part of the story. However, simply counting the number of income-tax returns can give an incomplete picture.

Detailed CBDT statistics for Assessment Year 2023-24 provide an important insight. Approximately 75.46 million individual income-tax returns were reported. But around 47.30 million of those returns had zero tax payable. In other words, roughly 63 per cent of individual returns carried no tax liability, while approximately 28.16 million had some tax payable.

This distinction is fundamental.

An income-tax return filer is not necessarily an income-tax payer.

There can be several legitimate reasons for filing a return despite having no final tax liability. Income may be below the taxable threshold, deductions and rebates may eliminate the liability, or filing may be required or desirable for other financial and statutory purposes.

Therefore, growth in the number of income-tax returns should not automatically be presented as equivalent growth in the number of people actually contributing income tax.

This changes the interpretation of India’s expanding income-tax base considerably.

Where Does the Salaried Class Fit In?

The salaried taxpayer occupies a distinctive position in India’s direct-tax system.

Salary income is highly visible to the tax administration. Employers report salary payments and tax is generally deducted at source through the TDS mechanism. Information is increasingly matched electronically with tax returns and other financial records.

Consequently, a salaried employee has relatively limited scope to keep salary income outside the tax system.

The same degree of automatic visibility does not necessarily apply to every form of self-employment or small-business income, particularly where economic activity involves numerous small transactions or cash payments.

This, however, needs to be discussed carefully.

It would be incorrect to assume that roadside vendors, shopkeepers or small traders necessarily evade income tax. Nor can high business turnover be equated with high taxable income. A business might have substantial gross sales while generating a comparatively modest profit after legitimate expenses. Small businesses may also fall within various threshold and presumptive-taxation provisions.

The real issue is therefore tax visibility rather than an assumption of tax evasion.

The salaried person’s principal income is recorded almost automatically. Income generated in parts of the self-employed and informal economy can be inherently more difficult for the tax administration to measure.

That asymmetry deserves greater attention when analysing who ultimately bears India’s direct-tax burden.

A Narrower Tax-Paying Base Than the Filing Numbers Suggest

The CBDT statistics also reveal another interesting characteristic: individual tax liability is significantly concentrated.

For AY2023-24, approximately half of total individual tax payable came from returns where the tax liability itself exceeded ₹10 lakh.

Thus, India’s individual income-tax story cannot simply be characterised as millions of ordinary citizens each paying approximately similar amounts.

Instead, three different populations coexist:

First, a very large population files income-tax returns but has no final tax payable.

Second, there is a smaller population that actually bears income-tax liability, including a substantial salaried component.

Third, within the tax-paying population, higher-income taxpayers account for a disproportionately large part of the total tax collected.

This is why aggregate figures such as “9 crore income-tax returns” can be misleading when used in isolation. The economically more relevant measures are the number of returns with positive tax liability, the distribution of that liability across income groups and, importantly, the source of income of those actually paying the tax.

Then Comes GST

The other striking development is the rapid growth of GST revenue.

Gross GST collections increased from approximately ₹11.37 lakh crore in FY2020-21 to around ₹22.27 lakh crore in FY2025-26—almost doubling within five years. See the following:

Gross GST collections were approximately:

That is an extraordinary increase in nominal collections.

But here again, interpretation matters.

Higher GST collections do not necessarily mean that the effective GST burden on an individual consumer has doubled. Collections can rise because the economy grows, prices increase, consumption expands, more businesses enter the formal economy and tax compliance improves.

GST collections therefore combine the effects of tax rates, nominal economic growth, consumption, formalisation and enforcement.

Nevertheless, GST is ultimately an indirect tax on consumption. Unlike income tax, its incidence is not confined to people whose incomes cross the income-tax threshold. Consumers encounter indirect taxation when purchasing taxable goods and services, including people who may pay little or no direct income tax.

This creates an interesting contrast.

A salaried middle- or higher-income taxpayer may contribute to government revenue through both channels: income tax is deducted from earnings, while GST is paid through consumption.

A person outside the income-tax-paying population may not have a direct income-tax liability but still contributes substantially through GST and other indirect taxes.

Therefore, the two forms of taxation cannot simply be added together to conclude that one particular group bears the entire burden. But their simultaneous growth makes the distribution of India’s overall tax incidence an important policy question.

What Do the Numbers Actually Tell Us?

The available evidence supports several conclusions, but also cautions against some tempting ones.

It is reasonable to say that India’s tax structure has changed significantly. Non-corporate income-tax collections have grown faster than corporate tax collections and have overtaken them. GST has simultaneously emerged as an exceptionally large source of government revenue.

It is also clear that India’s income-tax return base is much larger than its effective tax-paying base. CBDT’s detailed data showing that roughly 63 per cent of individual returns in AY2023-24 had zero tax payable makes this distinction particularly important.

What the available statistics do not yet establish, however, is that salaried employees alone bear the majority of India’s personal income-tax burden.

That conclusion would require a more detailed breakdown of actual tax paid according to the principal source of income—salary, business or profession, capital gains, house property and other sources. Aggregate ITR counts cannot answer that question.

Similarly, the data cannot establish that small traders or informal-sector participants generally evade income tax. That would require evidence on actual income, taxable profits, filing behaviour and compliance gaps.

These qualifications do not weaken the argument. They identify the question that deserves further investigation.

The Question India Should Perhaps Be Asking

The success of a tax system should not be judged merely by how much revenue it collects. A mature discussion should also examine how widely and equitably the burden is distributed.

India has made enormous progress in digitising taxation, expanding the return-filing population, improving information reporting and formalising economic transactions. Rising tax collections can therefore also be interpreted as evidence of improved state capacity and compliance.

Yet the changing composition of those collections deserves scrutiny.

When non-corporate income tax exceeds corporate tax, when a large majority of individual returns in the available detailed CBDT data carry no tax liability, and when GST collections have almost doubled within five years, simply celebrating the expansion of the “taxpayer base” tells only part of the story.

The more meaningful questions are:

How many people are actually paying income tax rather than merely filing returns? How is the tax liability distributed between salaried taxpayers, self-employed professionals and business owners? How much of the increase comes from rising incomes, how much from better compliance, and how much from a greater concentration of tax among those whose income is most visible to the system?

And finally, when direct and indirect taxation are considered together, how is India’s overall tax burden distributed across different sections of society?

These questions do not lead automatically to the conclusion that any particular group is overtaxed. But they do suggest that the headline number of income-tax returns—or the impressive growth in GST collections—is not sufficient to understand India’s changing tax landscape.

The next stage of India’s tax debate should therefore move beyond how much tax is collected to the more difficult question of who actually pays it.

Data Note: Figures are based primarily on CBDT/Income Tax Department, Department of Revenue and Government of India budget statistics. ‘Non-corporate tax’ should not be interpreted as tax paid exclusively by salaried individuals.

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