Often in conversations surrounding economic development, discussions typically revolve around enhancing taxation systems, integrating more individuals into formalized payment structures, and augmenting government tax revenues. However, beyond these focal points lies an oft overlooked transformation unfolding within India’s economic corridors.
The latest data from CBDT (Central Board of Direct Taxation) has revealed a record high number of Income Tax Returns – 8.18 crore to be exact. In fact, this is nine percent higher than the previous assessment year, when the total ITR filings were around 7.51 crores. The tax data further revealed that the e-filing helpdesk team executed 27.37 lakh queries from taxpayers, especially in periods of peak filing.
These numbers are a testament to the advancement of our nation’s citizenry exuding wider compliance, expansion of the formal workforce and a clear shift towards higher income slabs. But they also underscore a profound shift propelled by the silent revolution of digitalization within the payroll industry that goes beyond mere compliance; highlighting an increasingly positive impact of digitalisation and the emergence of the payroll industry.
Payroll digitalisation: A silent revolution
When we think of the massive digitisation initiatives undertaken by the Indian government, what first comes to mind is the UPI system – an initiative that has even caught the attention of the world. However, our nation has also experienced the emergence of numerous other digitalisation solutions that might not have gotten a similar limelight but have made a strong impact for professionals and businesses.
These include various easy-to-use payroll tools and HR products enabling tax calculations and making filing and administration hassle-free. The Indian government’s initiatives around simplifying tax filings, and ‘lightning speed’ responsiveness towards refunds have instilled a sense of transparency and confidence.
To put things in perspective, this assessment year, around 1.60 crore audit reports and corresponding forms were filed, from which a substantial portion of the data for all ITRs were prefilled with data on salary, interest, dividend, personal info and tax payment including TDS-related info etc.
The process of payroll which has traditionally been viewed as a routine back-office operation is today emerging as a cornerstone in India’s journey towards fair pay, compliance, and trust.
The digital revolution has encouraged employers further to deploy payroll solutions to ensure not only timely, accurate salary payments to employees but also timely payments to tax authorities (TDS) and other regulatory authorities. What many individuals don’t realise is that payroll practitioners are critical to ensuring tax filings and compliance in many organisations across the country.
The rise of 9% in taxpayers in one single year in AY2023-24 showcases the underlying transformation, where digital payroll tools are now being widely deployed across organisations.
Financial wellness – A harbinger of growth and productivity
Organisations are increasingly recognising the importance of financial literacy and understanding of payroll-related matters among their employees. This awareness is not only beneficial for compliance with tax regulations but also contributes to creating a positive and productive work environment.
Financial literacy defines our ability to understand and manage money, including saving, budgeting, investing, and other skills. By conducting sessions on topics like ‘know your tax’ or ‘decode your payslip,’ organisations today are helping employees to better understand their earnings, deductions, and tax obligations. This knowledge empowers employees to manage their finances more effectively, leading to increased financial well-being and satisfaction.
Additionally, educational sessions on payroll and taxes can lead to tax-efficient behaviours among employees. For instance, understanding the tax implications of investment decisions can influence how employees manage their investment portfolios, potentially leading to better financial outcomes. Employers can benefit from tax savings by offering certain employee benefits, such as educational assistance programs, which can be tax-deductible and provide mutual advantages for both the employer and the employees.
Inculcating a culture of trust, transparency, and compliance
The growth in the taxpayer base in India is not merely a statistical uptick but a reflection of a societal shift catalysed by digitalisation and the increasing prominence of the payroll industry. The rise in taxpayers is indicative of a broader transformation, where financial wellness initiatives can contribute significantly to the growth and productivity of the nation.
As the journey towards digitalisation continues, the payroll industry is expected to become even more crucial in steering India towards a future characterised by financial literacy, transparency, and compliance. Thus, the impact of payroll digitalisation is extending beyond administrative efficiency, influencing economic growth, employee well-being, and the overall financial literacy of the population.
Ultimately, the convergence of technology, education, and strategic initiatives will propel India towards a future where financial wellness is not just an aspiration but a fundamental pillar of economic prosperity.
Rahul Goyal, Managing Director, ADP
