Pay Gap in India Widens: Few In Crorepati League, Most Struggle Below Rs. 7.5 Lakh

An analysis of income-tax returns for the assessment year 2024-25 has highlighted stark disparities in income levels across Indian states. The data reveals a significant gap between wealthier and less affluent regions, with surprising results from some states.

In a twist, Jharkhand outperformed Gujarat regarding middle-class incomes. About 20% of taxpayers in Jharkhand reported annual earnings between Rs 12 lakh and Rs 50 lakh. In contrast, only 7% of Gujarat's taxpayers fell into this category. Notably, Gujarat did not make it to the top 10 states with the highest number of taxpayers earning between Rs 25 lakh and Rs 50 lakh. Maharashtra led this segment.

Income Distribution Among Middle-Class Tax Filers

The majority of India's middle class earns between Rs 2.5 lakh and Rs 7.5 lakh annually, according to the analysis. More than half of tax filers fall within this range, while only a small fraction, about 2.5%, earn above Rs 25 lakh. This highlights the limited size of India's upper-middle-income group.

Maharashtra emerged as the leader with nearly 1.4 lakh individuals declaring incomes between Rs 25 lakh and Rs 50 lakh, making it the highest in the country. Karnataka and Tamil Nadu followed closely behind in second and third places respectively. Karnataka also stood out for having over 20% of its tax filers earning between Rs 12 lakh and Rs 50 lakh annually, marking a high proportion of 'lakhpatis'. Surprisingly, Gujarat lagged at the bottom, with Bihar showing a stronger share in this income band.

Delhi's Unique Position in Taxpayer Proportion

While Maharashtra had over 46 lakh tax returns filed, Delhi recorded the highest proportion of taxpayers relative to its population. Nationally, around 3% of a state's population files taxes; however, Uttar Pradesh, despite being India's most populous state with the second-highest number of returns, has only a 1.5% taxpayer share.

The figures reveal a pronounced divide within India's middle class. States like Jharkhand and Karnataka are emerging with higher proportions of affluent earners compared to traditional economic powerhouses like Gujarat that lag behind in this specific income bracket. Meanwhile, most middle-class Indians continue to live on no more than Rs 7.5 lakh annually, underscoring how narrow upward mobility remains.