Why is India's taxpayer base growing faster than return filings?

The Tax Deducted at Source (TDS) system is increasingly capturing individuals, boosting the taxpayer base even if they don't file returns.

Which Indian state is leading in direct tax collection growth?

Telangana is the fastest-growing state in direct tax contributions, propelled by Hyderabad's IT sector.

What role does TDS play in India's tax system?

TDS ensures tax is collected at source on various incomes, increasing oversight and taxpayer inclusion, contributing significantly to direct tax collections.

Home / Business and Economy / India's Tax Base Booms: TDS Drives Growth Beyond Filers

India's Tax Base Booms: TDS Drives Growth Beyond Filers

27 Nov

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Summary

India's taxpayer base grew 17% to 116.1 million, while filed returns rose only 5.9%.
Expansion of Tax Deducted at Source (TDS) system fuels taxpayer growth.
Telangana leads direct tax collection growth, driven by Hyderabad's IT sector.

India's Tax Base Booms: TDS Drives Growth Beyond Filers

India's taxpayer base has surged by 17% to 116.1 million in assessment year 2024-25, outpacing the 5.9% growth in income tax returns filed. This widening gap is largely attributed to the increased coverage and effectiveness of the Tax Deducted at Source (TDS) system, which now constitutes 35% of gross direct tax collections. Digitalization and advanced compliance tools have strengthened this TDS-driven inclusion.

Experts suggest that while TDS deductions might lead some to believe their tax obligations are met, other factors contribute to this trend. These include exemptions for certain non-residents, belated returns, and the inclusion of individuals with incomes below taxable thresholds but with TDS applied on sources like interest or dividends. The expansion of reporting requirements through systems like the Annual Information Statement (AIS) further bolsters this comprehensive oversight.

In terms of regional performance, Telangana has shown remarkable growth, with its direct tax collection increasing eight-fold between FY19 and FY25, largely due to Hyderabad's prominence as an IT and services hub. This growth in tax contributions highlights the increasing economic activity and compliance being captured by the expanded TDS framework across the nation.

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