The number of assessees declaring nil gross tax liability has fallen by 1.2 million over the past five years, signalling a rise in India’s taxpayer base amid ongoing efforts to simplify the direct tax regime.
According to data shared with the Lok Sabha on Monday, the number of taxpayers reporting nil gross tax liability, before accounting for any rebates or relief, stood at 13.4 million for Assessment Year (AY) 2021-22. This figure declined to 12.2 million in AY 2025-26, marking a net reduction of approximately 1.2 million over the five-year period.
Sharpest drop transpired between 2022 and 2023
The sharpest drop occurred between AY 2021-22 and 2022-23 — around 8.68 lakh, followed by further reductions in subsequent years, though AY 2024-25 saw a slight uptick before declining again in AY 2025-26. The overall downward trend reflects a gradual reduction in the proportion of filers who fall entirely below taxable thresholds, even as total return filings have continued to grow.
Sandeepp Jhunjhunwala, Partner at Nangia Global Advisors, said the decline in the number of taxpayers reporting nil taxable income since 2021 reflects the combined effect of rising income levels, enhanced compliance architecture and strengthened enforcement frameworks.
“A sustained increase in average income has led to a greater number of individuals crossing the basic exemption threshold, thereby expanding the pool of taxpayers with positive tax liability,” Jhunjhunwala said.
This has further been reinforced by robust enforcement and data analytics mechanisms, including PAN-Aadhaar linkage, AI-driven risk profiling, non-filer monitoring systems, and cross-verification of high-value transactions, which have curtailed under-reporting and broadened the effective tax base, leading to a gradual reduction in nil-return filings,” he added.
This shift coincides with the government’s sustained efforts to modernize and clarify India’s direct tax framework. A comprehensive review of the Income-tax Act, 1961, culminated in the enactment of the new Income-tax Act, 2025, effective from April 1.