Wednesday, 09 Oct, 2024
By: Yash Gupte
A higher buoyancy indicates more effective tax collection. The highest buoyancy, 2.59, was observed in FY03, while it became negative (-1.21) in FY20. Image Source: IANS
The gross corporate tax collection (provisional) for the fiscal year 2022–23 is Rs. 10,04,118 crore and has increased by 16.91 percent from the previous year's gross corporate tax collection of Rs. 8,58,849 crore.
According to the time series data provided by the Central Board of Direct Taxes (CBDT), direct tax buoyancy, a measure of growth in the collection of personal income tax and corporation tax versus the growth in GDP rose to 2.52 in FY22, the highest level in the previous 15 years. A higher buoyancy indicates more effective tax collection. The highest buoyancy, 2.59, was observed in FY03, while it became negative (-1.21) in FY20. The CBDT highlighted the data for 22 years beginning in 2000–21. Tax buoyancy was not calculated for FY21 because both GDP and tax growth were negative. So buoyancy increased in FY22, most likely as a result of a low base effect.
In the ten years leading up to 2022–2023, gross direct tax receipts climbed by 173 percent, reaching approximately Rs 19.68 trillion. In the prior ten years, the growth rate was approximately 431.92 percent. From Rs 1.05 trillion in 2003–2004 to Rs 5.58 trillion in 2012–2013, direct tax revenue had increased by that point. The base, however, was small at the time. From 5.62 percent of GDP in 2013–14 to 5.97 percent in 2021–22, the direct tax share has risen. According to the data, the cost of collecting declined from 0.57 percent of the total collection in FY14 to 0.53 percent in FY22.
Considering the record increase in the direct tax buoyancy, India Tracker takes a look at the direct tax collection in FY2022-23 and also some of the major statistics released by the Ministry of Finance and Central Board of Direct Taxes.
As per the Ministry, Net Direct Tax Collections have increased by 121.18 percent from Rs. 6,38,596 crore in FY2013-14 to Rs. 14,12,422 crore in FY2021-22. Talking about the Gross Direct Tax Collections, it increased by over 126.73 percent in FY2021-22 reaching a figure of Rs. 16,36,081 crore from Gross Direct Tax Collections of Rs. 7,21,604 crore in FY2013-14.
Before accounting for refunds, the gross direct tax collection (provisional) for the fiscal year 2022–23 is Rs. 19.68 lakh crore, up 20.33 percent from the gross collection of Rs. 16.36 lakh crore in the previous financial year. The gross corporate tax collection (provisional) for the fiscal year 2022–23 is Rs. 10,04,118 crore and has increased by 16.91 percent from the previous year's gross corporate tax collection of Rs. 8,58,849 crore.
Commenting on the significant increase in direct tax collections in FY2022-23, Vivek Jalan, partner, Tax Connect Advisory said, “Data accumulation tools deployed by the tax department which leads to taxpayer data being pulled and automatically reconciled, along with the expansion of tax deduction and tax collection at source [TDS and TCS] provisions to track transactions from the source through the value chain, appear to be leading to substantial gains in collections.”
The gross personal income tax collection for FY 2022–23 is Rs. 9,60,764 crore, a 24.23 percent increase over the gross personal income tax collection of Rs. 7,73,389 crore for the year prior. In comparison to the refunds of Rs. 2,23,658 crore issued in FY 2021–2022, refunds of Rs. 3,07,352 crore were issued in FY 2022–2023—a rise of 37.42%. The government has projected a 10.5 percent growth in revenues from corporate and individual income tax to Rs 18.23 lakh crore in the current fiscal. Direct tax revenue, which includes income and corporate taxes, is anticipated to increase by more than 17 percent in FY23-24. Also, it must be noted that the FY22-23 has also witnessed record growth in gross corporate income tax (CIT) and gross personal income tax. This shows that in spite of tax cuts announced by the Finance Minister in the Union Budget 2023-24, there has been a significant growth in the collection of corporate income tax.
The central government’s direct tax collection has increased more than four times in last 12 years. The direct tax collection in the FY2010-11 was Rs 4,45,994 crore this increased to Rs 8,49,713 crore in FY2016-17 and now it has further increased to Rs 16,61,000 crore in FY2022-23. The direct tax collection for the FY2022-23 is record high till date.
One of the concerns is the prediction of a drop in direct tax collection in FY2023-24. The fiscal year 2022-23 has seen a record increase in net direct taxes, which are made up of personal income tax and the tax on corporate profits, exceeding the figures forecast in the Budget. Prior to the announcement of the Union Budget 2023–24 on February 1, 2023 a government source warned reporters that the predicted lower nominal GDP growth in 2023–24 on the basis of predictions of a worldwide recession could have an impact on income tax collection. In the current financial year, real GDP growth is projected to decrease to 6–6.5 percent, with nominal GDP growth also expected to be lower due to falling inflation.
