Income tax paid by India’s oldest citizens is gradually accounting for a larger share of the central government’s total kitty. According to new finance ministry data, those over the age of 70 years paid nearly 6 per cent of the income tax in 2023-24, up from 5.3 per cent in 2019-20.
Responding to a question in the Lok Sabha on August 18, Finance Minister Nirmala Sitharaman said that in the 2024-25 assessment year, the income tax collected from citizens above 70 years of age was Rs 61,624 crore, up 28 per cent from the previous year.
The assessment year is the year after the financial year during which the income earned is assessed and taxed.
Meanwhile, Budget documents show the total income tax collected by the central government in the financial year 2023-24 was Rs 10.45 lakh crore, 25 per cent higher from the previous year. As such, the income tax collected by those above the age of 70 years accounted for 5.9 per cent of the total income tax mop-up in 2023-24.
Faster tax growth for 70+
This figure has steadily risen in recent years. Back in 2019-20, the income tax collected from the aforementioned set of senior citizens was Rs 25,970 crore, or 5.3 per cent of the total mop-up. This rose 8 per cent in 2020-21 to Rs 28,091 crore even as the total income tax collected during the year fell by 1 per cent to Rs 4.87 lakh crore, reflecting the hit to incomes from the coronavirus pandemic. This divergence in income tax collection growth led to the share of those above 70 years of age rising by half a percentage point to 5.8 per cent.
The subsequent two financial years – 2021-22 and 2022-23 – saw some stability in the income tax share in question, first edging down to 5.7 per cent and then rising back to 5.8 per cent.
According to Niyati Shah, head of personal tax at 1 Finance, the trend of growing share of tax being collected from the oldest Indians is due to a combination of rising wealth, better enforcement, and greater awareness.
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“Firstly, more senior citizens are filing returns due to increased financial literacy, digital accessibility, and stricter reporting norms under the Income Tax Department’s compliance ecosystem. Secondly, income levels within this group have risen steadily, a large portion of seniors now derive earnings not just from pensions but also from fixed deposits, dividends, capital gains, and rental income. With equity markets performing strongly and bank deposit rates improving, investment-linked incomes are pushing many seniors into higher tax brackets,” Shah said.
“Additionally, enhanced TDS mechanisms, particularly on interest income and capital gains, have led to more upfront tax collections. The adoption of the new tax regime has also reshaped taxpayer behaviour by simplifying compliance and encouraging accurate income reporting, even though senior citizens continue to benefit from deductions under Sections 80D, 80DDB, and 80TTB in the old regime,” she added.
More years, more numbers
However, according to Shravan Shetty, Managing Director of Financial Services at Primus Partners, the explanation may be far simpler: increased life expectancy. This, according to Shetty, has resulted in an increase in the number of people over the age of 70 years, leading to higher tax collections from them.
“And these are the people who would have been in their 40s and 50s at the time of the 1991 liberalisation reforms and would have benefitted from the opening up of the economy. So, they would have generated wealth and income over the years,” Shetty added.
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As per government data, life expectancy at birth of males has risen from 59.4 years in 1990-94 to 68.6 years in 2016-20, while that of females has increased from 60.4 years to 71.4 years.
As for whether higher returns from greater investments in stock markets and mutual funds may have contributed to those over 70 paying more tax, Shetty said that was unlikely as investments in mutual funds have been driven by Systematic Investment Plans, or SIPs, which are mostly done by younger people. “Financial planners will not encourage people above the age of 70 to invest in stock markets and mutual funds because, at that age, you should be investing in debt and not take on large risks.”
Future concerns?
Both Shah and Shetty expect the share of older taxpayers in total income tax collections to increase further in the coming years. According to Shah, this would be due to diversification of retirement savings and more senior citizens entering the organised tax net.
Shetty, meanwhile, noted that the situation could become problematic if the growth in overall income tax collections is significantly lower than that of those over the age of 70. “Right now, the spread is not high: 28 per cent versus 25 per cent. But if it is 30 per cent growth in income tax collections from those above 70 and 20 per cent growth in overall income tax collections, then it is a challenge.”
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