India's economic formalization: FM predicts massive increase in tax filers by 2047

Finance Minister Nirmala Sitharaman said on Tuesday that the income tax data released in August was a clear indication of the wide-scale formalisation of the Indian economy and the improvement in tax compliance.

Addressing the inaugural session of the Global Fintech Fest 2023, Sitharaman said that India’s demographic dividend would translate into a larger and more productive workforce in the coming years.

She said that the workforce share in population would rise from 40% in 2021 to 45% by 2047, and that 85.3% of them would be taxable, compared to 22.5% currently. She estimated that the number of income tax filers would grow from 7 crore in FY23 to 48.2 crore in 2047, adding to the government’s revenue and spending capacity.

Sitharaman also highlighted the importance of digital literacy in enhancing financial inclusion and empowerment. She said that India had witnessed a remarkable growth in digital transactions, DMAT accounts, mutual funds and SIPs in the last four years, reaching new highs in 2023.

She said that these trends reflected the increasing financial awareness and participation of the masses, especially in the rural and semi-urban areas.
The Finance Minister also stressed the need for a responsible and resilient global financial system, especially in the context of emerging challenges such as cryptocurrency regulation, tax evasion and debt distress.

She urged for greater collaboration among different stakeholders, including regulators, policymakers, innovators and investors, to address these issues and ensure stability and sustainability