India's direct tax collections reached a significant milestone in FY24, contributing 6.64% to the country's GDP - A 24-year high. According to data released by the Central Board of Direct Taxes (CBDT), direct tax collections for the year surged by 17.82%, substantially outpacing the nominal GDP growth of 8.42%. This increase in collections highlights the efficiency and effectiveness of the tax administration and reflects a growing taxpayer base.
Direct tax buoyancy, which measures the responsiveness of tax collections to GDP growth, also improved to 2.12 in FY24, compared to 1.18 in FY23. The total direct tax collections for FY24 amounted to Rs 19.6 trillion, while gross collections before deducting refunds stood at Rs 23.4 trillion.
Personal income tax (IT) collections saw a remarkable rise of 25.4%, amounting to Rs 10.45 trillion, surpassing corporation tax collections of Rs 9.11 trillion for the second consecutive year. This shift signifies the increasing tax compliance among individuals, attributed to a more robust economy and government reforms encouraging transparency in tax filings.
Maharashtra led the state-wise contribution with Rs 7.61 trillion, representing over 40% of the total direct tax revenue from states. Meanwhile, the number of Income-Tax Returns (ITRs) filed grew by 10.7% in FY24, totalling 86.1 million.
The administrative cost of collecting direct taxes also declined to a 23-year low of 0.44%, showcasing enhanced efficiency in tax collection mechanisms. With more individuals joining the tax fold and growing economic activity, India's direct tax system is becoming more pivotal in financing the country's growth ambitions.
Conclusion
India's direct tax system demonstrated robust performance in FY24, driven by both personal income tax growth and efficient collection processes. The government's focus on widening the tax base and streamlining administration continues to bolster the contribution of direct taxes to the nation's fiscal health.
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