According to a recent report by the State Bank of India titled "Deciphering Emerging Trends in ITR Filing: The Ascent of the New Middle Class in Circular Migration," Andhra Pradesh has emerged as the frontrunner in adding new tax filers, with an impressive 1.8 million filings between the assessment years 2020 and 2023.

This surge in tax filings is attributed to the formalization of the MSME sector, supported by initiatives such as Udyam and GST registrations. However, it's essential to note that the PAN card address may not accurately reflect an individual's current work location, potentially skewing the data analysis.

The report highlights that Maharashtra, Uttar Pradesh, and Gujarat closely trailed Andhra Pradesh, showcasing 13.9 lakh, 12.7 lakh, and 8.8 lakh new tax filers, respectively.

In contrast, Telangana experienced negative growth, ranking 20th among all states during the same period. The top five states contributing to 60% of the total increase in ITR filings also accounted for 45% of all Udyam registrations, indicating a correlation between MSME registrations and tax filings.

Notably, Andhra Pradesh witnessed 6.6 lakh Udyam registrations and 4.1 lakh GST registrations during the analyzed period, further underlining the state's proactive approach towards economic formalization.

However, the reliance on PAN card addresses for ITR filings poses challenges, as individuals might continue to file their taxes under their native state despite working elsewhere.

According to Professor M. Prasada Rao, a member of the AP State Finance Commission, the upswing in ITR filings is driven by robust economic growth and increasing per capita income.

Despite the disruptions caused by the COVID-19 pandemic in 2020 and 2021, rising salaries, entrepreneurship, and gig economy participation have contributed to a broader tax base.

The SBI report forecasts significant shifts in income strata over the coming decades, with 25% of filers expected to move out of the lowest income bracket by 2047.

Additionally, around 17.5% may transition to the 5-10 lakh income group, 5% to the 10-20 lakh group, and 3% to the 20-50 lakh group by the same year. A smaller percentage is projected to enter higher income brackets, highlighting the evolving economic landscape.

Tax consultant Sunkara Srinivas from Vizag suggests that the new tax regime, which exempts individuals from paying taxes if their taxable income does not exceed 7.5 lakhs, including standard deductions, may have encouraged more people to file their taxes.

However, increased tax filings do not necessarily equate to full tax compliance, as various factors influence filing behavior.

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