If you felt that your salary has been stagnating over the past few years, there is now data from the income tax filings that turns the feeling into a fact. Middle India in the tax-included formal sector has expanded, but the average person within this band has barely seen salaries rise for the decade ending 2022-23.

Of course, those moving up the income bands have done better, but the average person in this band has not gained much. Also upending the inequality narratives, the rich, on an average, have not got richer in terms of salary incomes. But the lower income cohort has been the biggest average salary-gainer over the decade.

The most striking story evident from the Income Tax Return Statistics for FY13 and FY23 released by the income tax department is one of formalisation of the Indian economy. I examine the salary tax filing of individuals. While nominal (real plus inflation) gross domestic product (GDP) grew at around 10.5% a year over the decade, the total salary growth for all individuals has been an impressive ~16% a year. But the average salary of all individual income-tax filers grew by only about 6.5% a year over the decade ending FY23.

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Who is growing? The middle class. If we define the middle class as the section that has salary incomes between ₹10 and 50 lakh a year, this cohort has substantially increased its share of salary income over the decade. From just over a quarter in FY13, it now earns almost half of all salary income earned in FY23. A decade ago, salary incomes less than........

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