{"id":43010,"date":"2024-10-18T04:22:44","date_gmt":"2024-10-17T22:52:44","guid":{"rendered":"https:\/\/vajiramandravi.com\/current-affairs\/?p=43010"},"modified":"2025-10-14T12:01:30","modified_gmt":"2025-10-14T06:31:30","slug":"direct-tax-collection-reaches-14-year-high-in-2023-24","status":"publish","type":"post","link":"https:\/\/vajiramandravi.com\/current-affairs\/direct-tax-collection-reaches-14-year-high-in-2023-24\/","title":{"rendered":"Direct Tax Collection Reaches 14-Year High in 2023-24"},"content":{"rendered":"<h2><strong>What\u2019s in today\u2019s article?<\/strong><\/h2>\n<ul>\n<li>Why in News?<\/li>\n<li>What is Direct tax?<\/li>\n<li>Key highlights of the data released by the CBDT<\/li>\n<li>Analysis<\/li>\n<\/ul>\n<h2><strong>Why in News?<\/strong><\/h2>\n<p>According to data released by the Central Board of Direct Taxes (CBDT), the contribution of direct taxes to total tax revenue climbed to 56.72 per cent in 2023-24, the highest in 14 years.\u00a0<\/p>\n<h3><strong>What is Direct tax?<\/strong><\/h3>\n<ul>\n<li><strong>About<\/strong>\n<ul>\n<li>Direct tax is a tax paid directly by the taxpayer to the government and cannot be shifted.<\/li>\n<li>This is the opposite of indirect tax, which is a tax levied on goods and services and can be passed on to another entity or individual.\u00a0<\/li>\n<li>The direct rules are framed such that taxes turn out to be a method to redistribute money in the country.<\/li>\n<\/ul>\n<\/li>\n<li><strong>Examples<\/strong>\n<ul>\n<li>The more common types of direct tax are: Individual income tax; Corporate income tax; Capital gains tax; Estate tax; Property tax etc.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<h2><strong>Key highlights of the data released by the CBDT<\/strong><\/h2>\n<figure class=\"image image_resized\"><img decoding=\"async\" src=\"https:\/\/vajiram-prod.s3.ap-south-1.amazonaws.com\/Direct_Tax_Collection_c17fc2de8c.webp\" alt=\"Direct Tax Collection Reaches 14-Year High in 2023-24\" \/><\/figure>\n<ul>\n<li><strong>Record Contribution of Direct Taxes in 2023-24<\/strong>\n<ul>\n<li>In FY24, the contribution of direct taxes to total tax revenue reached 56.72%, the highest in 14 years.\u00a0<\/li>\n<li>This marks an increase from 54.63% in FY23, reducing the share of indirect taxes to 43.28%.<\/li>\n<\/ul>\n<\/li>\n<li><strong>Direct tax-to-GDP ratio<\/strong>\n<ul>\n<li>The direct tax-to-GDP ratio also hit a <strong>two-decade high of 6.64%.<\/strong>\n<ul>\n<li>A &#8220;direct tax-to-GDP ratio&#8221; is\u00a0an economic indicator that measures the proportion of a country&#8217;s total direct tax revenue relative to its Gross Domestic Product (GDP).<\/li>\n<li>It essentially shows how much direct tax is collected compared to the overall size of the economy.<\/li>\n<li>A higher ratio indicates the government is effectively collecting more <a href=\"https:\/\/vajiramandravi.com\/current-affairs\/direct-tax\/\" target=\"_blank\">direct taxes<\/a> from its citizens, allowing for greater funding of public services and investments.<\/li>\n<li>It signifies a potentially stronger tax administration and better compliance within the economy.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n<li><strong>Surge in Personal Income Tax Collections<\/strong>\n<ul>\n<li>For the second consecutive year, personal income tax collections exceeded corporate tax collections.\n<ul>\n<li>Corporate tax is a direct tax imposed by the government on the income or profits earned by a corporation.\u00a0<\/li>\n<li>Unlike individual income tax, which is levied on personal earnings,\u00a0corporate tax\u00a0is specifically targeted at business entities, including both domestic and multinational companies.\u00a0<\/li>\n<\/ul>\n<\/li>\n<li>In FY24, personal income tax collections stood at \u20b910.45 lakh crore, surpassing corporate tax collections of \u20b99.11 lakh crore.\u00a0\n<ul>\n<li>This shift began after the corporate tax rate cut in September 2019.<\/li>\n<li>Tax rates for corporates were cut in September 2019 in India, with the rate for existing companies reducing from 30 to 22%, and that of new companies from 25 to 15%.\u00a0<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n<li><strong>Tax Buoyancy Growth<\/strong>\n<ul>\n<li>Tax buoyancy, indicating the growth rate of taxes relative to the nominal economic growth, increased to 2.12 in FY24, compared to 1.18 in FY23.\u00a0\n<ul>\n<li>Tax buoyancy is a ratio of change in tax revenue in relation to change in gross domestic product or GDP of an economy.\u00a0<\/li>\n<li>It measures how responsive a taxation policy is to growth in economic activities.<\/li>\n<\/ul>\n<\/li>\n<li>This marked the highest level since FY22 (2.52).<\/li>\n<\/ul>\n<\/li>\n<li><strong>Cost of Tax Collection at a Record Low<\/strong>\n<ul>\n<li>The cost of tax collection dropped to 0.44% of total tax collections, the lowest since 2000-01.\u00a0<\/li>\n<li>However, in absolute terms, the cost increased to \u20b98,634 crore.<\/li>\n<\/ul>\n<\/li>\n<li><strong>Increase in Tax Filers and Taxpayers<\/strong>\n<ul>\n<li>Income tax return filers grew from 7.4 crore in FY23 to 8.09 crore in FY24.\u00a0<\/li>\n<li>Taxpayers, defined as those filing returns or having tax deducted at source, increased from 9.37 crore to 10.41 crore.<\/li>\n<\/ul>\n<\/li>\n<li><strong>State-Wise Direct Tax Contributions<\/strong>\n<ul>\n<li>Maharashtra contributed 39% of the total direct tax revenue (\u20b97.6 lakh crore), followed by Karnataka (12% or \u20b92.34 lakh crore) and Delhi (10.4% or \u20b92.03 lakh crore).<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<h2><strong>Analysis<\/strong><\/h2>\n<ul>\n<li><strong>Sign of Progressive Taxation and Equity<\/strong>\n<ul>\n<li>A higher share of direct taxes, linked to income levels, is considered progressive as it reduces the burden on the poor compared to indirect taxes.\u00a0<\/li>\n<li>The last time the share of direct taxes exceeded FY24 levels was in FY10, at 60.78%.<\/li>\n<\/ul>\n<\/li>\n<li><strong>Signals a growth phase of the Indian economy<\/strong>\n<ul>\n<li>As per the experts, the increasing share of direct tax collections and significant jump in direct tax-to-GDP ratio signal a growth phase of the Indian economy.<\/li>\n<\/ul>\n<\/li>\n<li><strong>Increased formalization of the economy<\/strong>\n<ul>\n<li>The government has steadily increased its data collection as well as its IT prowess, in addition to expanding the scope of taxes collected or deducted at source.\u00a0<\/li>\n<li>The increased formalization of the economy too has helped.<\/li>\n<\/ul>\n<\/li>\n<li><strong>Credit to the government\u2019s efforts\u00a0<\/strong>\n<ul>\n<li>A fair share of credit can be given to the government\u2019s efforts in rationalizing direct tax provisions and in bringing tax certainty among the investor community.\u00a0<\/li>\n<li>Key steps such as dispute resolution schemes and digitization of tax compliance procedures have played a key role in boosting direct tax collections.\u00a0<\/li>\n<li>The cost of collection has also gone down which is likely the result of use of technology and artificial intelligence tools by tax department in its operations<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<hr \/>\n<h3><strong>Q.1. What contributed to the surge in direct tax collection in 2023-24?<\/strong><\/h3>\n<p>The increase is attributed to personal income tax outpacing corporate tax, rationalized provisions, and the government&#8217;s efforts to digitize tax compliance and boost collection efficiency.<\/p>\n<h3><strong>Q.2. Why is a higher direct tax-to-GDP ratio significant?<\/strong><\/h3>\n<p>A higher direct tax-to-GDP ratio indicates effective tax collection and economic formalization, signaling the growth of the Indian economy<\/p>\n<p><strong>Source:<\/strong> <a href=\"https:\/\/indianexpress.com\/article\/business\/direct-taxes-revenue-surges-56-72-fy24-highest-14-years-9625458\/\" target=\"_blank\" rel=\"nofollow noopener\">Direct taxes bring 57% to total revenue, highest in 14 years<\/a> | <a href=\"https:\/\/www.thehindu.com\/business\/Economy\/corporate-tax-cuts-effects-india-us-wages\/article68602594.ece\" target=\"_blank\" rel=\"nofollow noopener\">The Hindu<\/a> | <a href=\"https:\/\/www.business-standard.com\/economy\/news\/direct-tax-gdp-ratio-rises-to-24-yr-high-of-6-64-in-fy24-shows-govt-data-124101701510_1.html\" target=\"_blank\" rel=\"nofollow noopener\">Business Standard<\/a> | <a href=\"https:\/\/www.livemint.com\/economy\/direct-taxes-collection-taxpayers-central-board-of-direct-taxes-cbdt-tax-receipts-gdp-11729177278916.html\" target=\"_blank\" rel=\"nofollow noopener\">Live Mint<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Direct taxes contributed 56.72% to total revenue in 2023-24, with personal income tax surpassing corporate tax collections, marking a significant shift post-corporate tax cuts.<\/p>\n","protected":false},"author":5,"featured_media":43011,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[18],"tags":[],"class_list":{"0":"post-43010","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-upsc-mains-current-affairs","8":"no-featured-image-padding"},"acf":[],"_links":{"self":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/43010","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/users\/5"}],"replies":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/comments?post=43010"}],"version-history":[{"count":0,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/43010\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media\/43011"}],"wp:attachment":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media?parent=43010"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/categories?post=43010"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/tags?post=43010"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}