The Centre’s direct tax collection performance has gone further up in FY24 on all counts, including the revenue collected, number of taxpayers, rate of tax collection growth in relation to economic growth rate and the cost of tax collection, data released by the Central Board of Direct Taxes (CBDT) on Thursday showed.
Direct taxes levied on income of individuals and corporations continued to increase its share in the Centre’s overall tax collections. Direct taxes accounted for 56.7% of the Centre’s total tax revenue in FY24, up from 54.63% in the year before.
The share of personal and corporate income in overall tax receipts had crossed the halfway mark in FY18 and maintained a steady increase except in the pandemic year of FY21, when it had fallen to 46.8% before further improving to 52.27% in the subsequent year, data showed.
Direct tax collection has also been growing faster than the pace of economic growth rate in the last three years. In FY24, tax buoyancy or responsiveness of tax revenue growth to changes in economic growth rate, was at 2.12, indicating that direct tax collection was growing twice as fast as economic growth rate.
The Centre’s cost of tax collection too has been falling from 0.76% in FY21 to 0.44% in FY24, indicating the effectiveness of tax administration.
Widening scope
The government has steadily increased its data collection as well as its IT prowess, in addition to expanding the scope of taxes collected or deducted at source. The increased formalization of the economy too has helped.
The increasing share of direct tax collections and significant jump in direct tax-to-GDP ratio signal a growth phase of the Indian economy, according to Sandeep Sehgal, partner-tax at AKM Global, a tax and consulting firm.
“A fair share of credit can be given to the government’s efforts in rationalizing direct tax provisions and in bringing tax certainty among the investor community. Key steps such as dispute resolution schemes and digitization of tax compliance procedures have played a key role in boosting direct tax collections. The cost of collection has also gone down which is likely the result of use of technology and artificial intelligence tools by tax department in its operations," said Sehgal.
The direct tax-to-GDP ratio stood at 6.64% in FY24, up from 6.11% in the year before.
The total number of taxpayers—those who have filed tax returns, and those who have had tax deducted at source but have not filed a return form—has gone up from 93.7 million in 2022-23 assessment year to 104 million in the assessment year 2023-24.
Assessment year is the year in which tax returns are filed for the income earned in the year before.
The number of people filing income tax returns has also increased steadily over the years. In FY24, over 80 million persons filed income tax returns, data showed.
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