With strong support from personal income tax, the government has collected nearly 21 per cent Budget Estimates of direct taxes in just 78 days of the current fiscal, data released by Finance Ministry on Tuesday showed. Direct taxes comprise personal income tax (PIT) and corporate income tax (CIT).
The Ministry said that net direct tax collection (gross collection minus refund) between April 1 and June 17 surged to over ₹ 4.62- lakh crore. This is nearly 21 per cent higher than collection during corresponding period of FY23 which was over ₹3.82-lakh crore. Collections under PIT and CIT during current fiscal were over ₹2.81-lakh crore and ₹1.81-lakh crore, respectively.
This means over 24 per cent of Budget Estimate for PIT and over 17 per cent of CIT have been collected in little over 2 ½ months. According to the Interim Budget, PIT is estimated to grow to ₹11.56-lakh crore in BE (Budget Estimate) 2024-25, which is higher by 13.1 per cent over RE (Revised Estimate) 2023-24. Similarly, CIT is estimated at ₹10.43-lakh crore in BE 2024-25, a growth of 13 per cent over RE 2023-24.
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Advance tax mop-up
Talking about advance tax collection, the statement said provisional figures of total advance tax collections for FY25 (as on June 17) stood at over ₹1.49-lakh crore against over ₹1.17-lakh crore, showing a growth of over 27 per cent. The advance tax collection comprised CIT at over ₹1.14-lakh crore and PIT of over ₹34,000 crore.
Though the statement has not listed reasons for the growth, but experts felt compliance along with rise in income and formalisation of the economy. Rohinton Sidhwa, Partner with Deloitte India, said: “Validation of economic growth in the Indian economy is taking place in the shape of the increased advance tax collections. The growth is showing up in both direct and indirect taxes and is also indicative of a greater formalisation of the economy and better compliance.”
Digital drive
Digitalisation also boosted the growth. Gouri Puri, Partner with Shardul Amarchand Mangaldas & Co. “The year-on-year increase in direct tax collections is a result of India’s growing economy, which is increasingly becoming more digital and formal leading also to higher tax compliance rates,” she said.
The government is hopeful of higher collection with the help of various reform measures. For example, scope of TDS and TCS has been widened by including new transactions like foreign remittance, purchase of luxury cars, e-commerce participants. A new provision has been introduced in the Income Tax Act requiring the successor entity to file a modified return within 6 months of the order of reorganisation being passed by the competent authority. Similarly, e-Verification scheme enables the authorities to collect information for the purpose of accurate and comprehensive determination of income to reduce tax evasion.