Time to Address India’s Fleeing Millionaire Problem – Outlook Business

Increase in Tax Collections – What does it really mean?

The tax rates have substantially fallen over the past couple of years and the government has forgone an estimated sum of Rs. 1 lakh crores. Despite this, statistics reveal that India has witnessed a significant growth in the number of individual taxpayers as well as in the tax collected from them. For instance:

The number of individual taxpayers rose from 99.1 million in AY 2023-24 to 116 million in AY 2024-25, an increase of 17.10%;

The number of individual return filers grew from 76.4 million in FY 2023-24 to 80.9 million in FY 2024-25, reflecting 5.91% growth;

The net non-corporate tax collections rose by 8.72% to Rs 7.19 lakh crore in FY 25-26 up to 10 November 2025, compared with Rs 6.61 lakh crore during the same period last year; and

The income tax department also received 58.57 lakh tax returns from first-time filers until 31 July 2024.

The increase in the number of individual taxpayers and the direct tax collections from them is indeed encouraging. However, it may be worthwhile to note that the numbers may partially pertain to new individuals entering the mainstream every year. Reports indicate that more than 13 million net subscribers joined EPFO during 2023-24. Another source says that approximately 7-8 million young people are added to the labour force each year.

India’s rising taxpayer base is a positive sign of formalization and growth. But the increase in collections does not automatically mean existing taxpayers are earning or contributing more. For instance, in the case of HNIs, a 25% surcharge can raise the effective tax rate to 39% (30% plus 25% surcharge and 4% cess). 

This is a very high rate and results in the migration of Indian taxpayers to other countries. Consequently, a part of the rise in taxpayers and tax collections may simply reflect more young earners joining the workforce each year. The momentum is encouraging, yet the real opportunity lies in widening participation by retaining talent that may otherwise move to low-tax jurisdictions.