New Delhi: The country has seen strong growth in direct tax collection in the last 10 years, which was largely fuelled by the growth in personal income tax collection and corporate tax collection as direct tax collection nearly tripled between FY 2013-14 and FY 2023-24, an analysis of the latest tax data by ETV Bharat showed.
Direct taxes are those taxes that are collected by the government directly from taxpayers such as Income Tax and Corporation Tax levied under the Income Tax Act of 1961. As against this, Indirect Taxes are those taxes where a customer pays taxes such as GST and Customs Duties indirectly to the government.
The data showed that the overall direct tax collection nearly tripled in the last 10 years while personal income tax collection jumped by over 300 per cent during this period, another important source of direct taxes, the corporation tax, more than doubled during this period.
The data shows that the Department of Revenue under the Ministry of Finance collected Rs 3.95 lakh crore in FY 2013-14 as Corporate Tax, Personal Income Tax collection was just Rs 2.43 lakh crore in that year and the collection from other direct taxes was just Rs 1,030 crore, taking the total direct collection in the financial year to over Rs 6.38 lakh crore. However, the Union Government’s direct tax collection has seen steady growth since then.
Steady rise in direct tax collection
For example, corporate tax collection grew to Rs 4.29 lakh crore while personal income tax collection increased to Rs 2.66 lakh crore, taking the total direct tax collection to nearly Rs 6.96 lakh crore, a growth of over 9 per cent.
Similarly, the direction increased to Rs 7.42 lakh crore in the FY 2015-16, as corporate tax collection was over Rs 4.53 lakh crore and personal tax collection was over Rs 2.87 lakh crore, showing an overall modest growth in direct tax collection at little over 6 per cent.
In FY 2016-17, corporate tax collection for the first time reached nearly Rs 5 lakh crore as that year the government collected Rs 4.85 lakh crore in corporate taxes while personal income tax collection also touched Rs 3.5 lakh crore, taking the total direct tax collection at around Rs 8.5 lakh crore. Direct Tax collection in that year showed a very robust year-on-year growth of over 14 per cent.
Direct Tax Collection crosses Rs 10 lakh crore mark
In FY 2017-18, for the first time, the direct tax collection crossed the mark of Rs 10 lakh crore. In that year, authorities collected Rs 5.71 lakh crore in corporate taxes while personal income tax collection was above Rs 4.2 lakh crore, while other direct tax collection was over Rs 11,450 crore, taking the total direct tax collection to Rs 10.03 lakh crore.
A careful examination of the latest official data shows that it took six years to double the direct tax collection from nearly Rs 5 lakh crore in FY 2011-12 when it was over Rs 4.93 lakh crore to over Rs 10 lakh crore in FY 2017-18.
Interestingly, it took another six years to double the direct tax collection from Rs 10 lakh crores to nearly Rs 20 lakh crores in the last financial year (FY 2023-24), as per the provisional estimates, the direct tax collection has been estimated at over Rs 19.6 lakh crore.
The economy underwent 2 major structural reforms in the 2016-2017 period
In his first term, Prime Minister Narendra Modi’s government carried out two major structural economic reforms that affected the country's economy in their own unique ways and as a result tax collection was also impacted.
For example, in November 2016, the government announced the discontinuation of currency notes of Rs 500 and Rs 1,000 which significantly impacted the SME sector and informal economy which was reliant on cash circulation.
Similarly, in July 2017, the government implemented a nationwide common goods and services tax (GST) that subsumed most of the Union and State indirect taxes. Though these two majors led to the formalisation of the country’s economy, they also impacted tax collection, including direct tax collection in their own way which was reflected in the time series data released by the government.
For example, direct tax collection went up to Rs 11.38 lakh crore in FY 2018-19, with personal income tax collection at around Rs 6.64 crore and personal income tax collection at over Rs 4.73 lakh crore.
However, the next two financial years FY 2019-20 and FY 2020-21, saw the unprecedented adverse economic impact of the Covid-19 global pandemic which killed over 7 million people worldwide.
As a result, the direct tax collection also declined to Rs 10.51 lakh crore in FY 2019-20 and further declined to Rs 9.47 lakh crore in FY 2020-21, which was below the FY 2017-18 level.
Steady rise in tax collection post-Covid-19
However, since then the Indian economy has recovered very fast and as a result, the direct tax collection shot up from below Rs 9.5 lakh crore in FY 2020-21 to over Rs 14.12 lakh crore in the next financial year.
FY 2022-23 saw another interesting trend emerge as it was the first time personal income tax collection was higher than corporate tax collection. In that year, the government collected over Rs 8.33 lakh crore in personal income tax while corporate tax collection was Rs 8.26 lakh crore with total direct tax collection at Rs 16.64 lakh crore.
Similarly, in the last financial year, personal income tax collection strengthened its lead over corporate tax collection as the government collected over Rs 10.45 lakh crore personal income tax while corporate tax collection was just Rs 9.11 lakh crore as per the provisional data, taking the total direct tax collection to over Rs 19.6 lakh crore.
