Highlights of Direct Tax Collections

Highlights of Direct Tax Collections

Sub: Economy

Sec: Fiscal Policy

The latest data on India’s direct tax collections for the first quarter of the fiscal year 2024-25 (ending June 17, 2024) highlights significant trends in both personal income tax (PIT) and corporate income tax (CIT).

• Overall Growth:
  • Net direct tax collections increased by 21% year-on-year, reaching approximately ₹4.63 lakh crore by June 17, 2024, up from ₹3.82 lakh crore in the same period last year.
• Personal Income Tax (PIT) and Securities Transaction Tax (STT):
  • PIT and STT contributed a significant 60.7% of the total net direct tax receipts.
  • This indicates a growing reliance on personal income and securities transaction taxes compared to corporate taxes.
• Corporate Income Tax (CIT):
  • The share of corporate taxes in the total net direct tax receipts has declined to 39.1%.
  • This marks a notable shift from previous years where corporate taxes constituted a larger portion of the direct tax revenue.
• Comparison with Previous Fiscal Year (FY24):
  • In FY24, net direct tax collections saw a 17.7% increase, totaling ₹19.58 lakh crore.
  • The share of PIT in the total net direct taxes rose to 53.3%, up from 50.1% the previous year.
  • Conversely, the share of CIT declined to 46.5%, down from 49.6%.
• Advance Tax Collections:
  • Advance tax collections for the current year grew by 27.3%, amounting to ₹1,48,823 crore.
  • Out of this, ₹1,14,353 crore was paid as CIT and ₹34,470 crore as PIT.
• Gross Tax Collections:
  • Before accounting for refunds, gross direct tax collections increased by 22.2%, reaching approximately ₹5.16 lakh crore by June 17, 2024, compared to ₹4.22 lakh crore in the same period last year.
  • Gross CIT collections were ₹2.26 lakh crore, while PIT and STT collections were ₹2,88,993 crore.
• Tax Deducted at Source (TDS):
  • TDS yielded ₹3,24,787 crore among the minor heads of tax receipts.

Analysis and Implications

• Shift in Tax Structure:
  • The increasing share of PIT and STT indicates a broadening of the tax base with more individuals and transactions being brought under the tax net.
  • The decline in the share of CIT suggests either a slower growth in corporate profits or a shift in the tax policy focus towards indirect taxes and personal income.
• Policy Implications:
  • The government may need to consider measures to stimulate corporate growth and profitability to balance the tax structure.
  • Encouraging corporate investments and providing incentives for business expansion could help in increasing CIT contributions.
• Economic Implications:
  • Higher PIT and STT collections reflect a positive trend in personal incomes and stock market activities, which are essential indicators of economic health.
  • The significant growth in advance tax collections indicates strong revenue expectations from both individuals and corporations.

Conclusion

The data indicates a robust growth in India’s direct tax collections driven primarily by PIT and STT.

The declining share of CIT highlights a potential area of focus for policymakers to ensure balanced and sustainable tax revenue growth. The government may need to explore strategies to boost corporate profitability and investments to maintain a healthy and diverse tax base.