New Delhi: In a significant fiscal development, India is witnessing a projected threefold increase in its tax collection under the decade-long governance of Prime Minister Narendra Modi. The net direct tax collections, a combination of personal income tax and corporate tax, have shown a remarkable upward trajectory.
Historical Growth: The net direct tax collections have risen from Rs 6.38 trillion in FY 2013-14 to an impressive Rs 16.61 trillion in FY 2022-23. This increase is indicative of the growing income of individuals and corporations in the country.
Current Fiscal Year Performance: The current financial year has seen a 20% growth in net direct tax collections. Continuing at this pace, it is estimated that the collections could reach around Rs 19 trillion by the end of the fiscal year on March 31, 2024, surpassing the budgeted estimate of Rs 18.23 trillion for the 2023-24 fiscal year.
Tax Regime Reforms: Over the years, the Modi government has endeavored to simplify the tax regime. This includes offering lower tax rates for corporates who forego exemptions and introducing a similar scheme for individuals in April 2020. The 2023-24 Budget further made the new income tax regime more attractive by rationalizing the tax slabs, raising the basic exemption limit to Rs 3 lakh, and including a standard deduction of Rs 50,000. These reforms aim to enhance tax compliance and simplify the tax process for taxpayers.
Digitalization and Tax Compliance: The government’s focus on the digitalization of tax administrations and the formalization of the economy has contributed to higher tax compliance rates. The number of Individual Tax Returns (ITRs) filed has grown significantly, from 3.36 crore in 2013-14 to 6.37 crore in 2021-22, marking an overall increase of 90%. As of October 2023, 7.41 crore returns have been filed, including 53 lakh returns by first-time filers.
Future Outlook: Experts suggest that the continued focus on streamlining direct tax provisions will enhance tax certainty and ease of doing business in India. With the robust growth in direct tax collections and Goods and Services Tax (GST) mop-up reaching new heights, the trend is expected to continue in 2024, supported by a strong economic performance.
The Modi government, which came to power in 2014, has demonstrated a strong commitment to fiscal reforms and tax rationalization. The full Budget for the next fiscal year is likely to focus on further initiatives to bolster investment, innovation, and economic growth.