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Last week, the government shared the second version of "Income Tax Return Statistics" for assessment year 2012-13. As such, the data correspond to the 2011-12 financial year. The first version was released in April but there were significant enough inconsistent entries - 150,000 of them - and so the government has come out with a second version. Income tax data were shared, triggered by the demand from economist Thomas Piketty, who had criticised the lack of transparency in India's income tax data. He had said the existing data sources for studying inequality are inadequate and they underestimate inequality in India.
The data give a broad sense of income distribution as well as inequality. Table 1 shows that over 90 per cent of all returns were filed by individuals. However, as Table 2 shows, more than two-thirds of the returns filed by individuals were by those earning less than Rs 3.5 lakh per annum. Table 3 deduces this data to provide a sense of how income is distributed among people. The top one per cent (in terms of income level) of the population accounts for 18 per cent of the total income while the bottom 50 per cent of the people account for just 21 per cent of the income.
Since data on income were not available, inequality was measured using consumption expenditure as a proxy for income. Table 4 shows that if compared to the early 1980s, inequality has gone up in the country. However, as Table 5 shows, when compared with other countries, India could have done worse.
