Direct tax share up at 57 per cent of total tax revenue, highest in 14 years

• The contribution of direct taxes to total tax revenue climbed to 56.72 per cent in 2023-24, the highest in 14 years. The surge was even more stark in the direct tax-to-GDP ratio.

Highlights:

• In the financial year 2023-24, direct taxes contributed 56.72% to India's total tax revenue, the highest level in 14 years. The direct tax-to-GDP ratio also reached a two-decade high of 6.64%, according to data from the Central Board of Direct Taxes (CBDT).

Trends in Tax Revenue:

• Increase in Direct Tax Contribution
• The share of direct taxes rose from 54.63% in the previous year.
• Indirect taxes have decreased to 43.28% of total tax revenue, marking a significant shift.
• The last time direct taxes exceeded 56.72% was in FY10, when it reached 60.78%.

Personal vs. Corporate Tax Collections:

• Personal income tax collections surpassed corporate tax collections for the second consecutive year in FY24.
• Personal income tax totaled ₹10.45 lakh crore, while corporate tax was ₹9.11 lakh crore.
• This trend reverses the previous situation where corporate tax collections were generally higher before the government's corporate tax cuts in September 2019.

Tax Buoyancy and Collection Costs

Tax Buoyancy:

• Tax buoyancy, indicating the growth rate of taxes relative to the economy's nominal growth, increased to 2.12 in 2023-24 from 1.18 in the prior year.
• A tax buoyancy level above 2 was last recorded in 2021-22.

Cost of Tax Collection:

• The cost of tax collection fell to 0.44%, the lowest since 2000-01.
• In absolute terms, the cost increased to ₹8,634 crore, marking the highest level since 2000-01.

Growth in Tax Filers and Taxpayers:

• Income tax return filers rose to 8.09 crore in FY24, up from 7.4 crore in FY23.
• The total number of taxpayers increased to 10.41 crore, compared to 9.37 crore the previous year.

State-wise Contribution to Direct Taxes:

• Approximately 39% of total direct tax revenue came from Maharashtra (₹7.6 lakh crore), followed by Karnataka at 12% (₹2.34 lakh crore) and Delhi at 10.4% (₹2.03 lakh crore).

Prelims Takeaways:

• Central Board of Direct Taxes (CBDT)
• Indirect Taxation