Personal income tax collection set to exceed corporate income tax for second year in a row

Personal Income Tax (PIT) collection is set to exceed Corporate Income Tax (CIT) for the second successive year in a row, data from Income Tax department showed. It also showed that fiscal year (FY) 2023-24 is also likely to see the share of direct taxes higher than indirect taxes in overall tax collection.

Income tax data for the period starting from FY2000-01 to FY 2022-23 showed that there have only been two instances (FY 2020-21 and FY 2022-23) when PIT collection was higher than CIT. Now, the Budget document for FY 2024-25 has revised the PIT collection to over ₹10.22 lakh crore as against ₹9.22 lakh crore during the current fiscal year. It will be the second successive year of PIT being higher than CIT.

In a recent interview to businessline, Revenue Secretary Sanjay Malhotra termed higher PIT collection as ‘good news’. “We feel this is the result of various initiatives undertaken by the government over the past few years. These include use of technology in a big way, permit filing of updated returns, use of Annual Information Statement (AIS), simplification and rationalisation of tax rates, besides others,” he had said.

Also read: Withdrawal of small IT demands not to entail credit, refund, says IT Dept

‘Desired trajectory’

Chairman of Central Board of Direct Taxes (CBDT) Nitin Gupta attributed higher number of returns for the growth of tax collection. “Last year, the growth in the said number was 5 per cent and, this year, we have already achieved 9 per cent growth,” he said. Further he said that higher PIT is another indication of India moving towards achieving the status of developed nation.

“As we develop, personal income tax should be higher than corporate income tax. That is the desired trajectory and it is good that we are moving in that direction. When the Prime Minister is talking about Viksit Bharat in 2047 and third largest economy by 2027, such a trend shows we are on the right path,” he said.

However, despite higher growth, PIT payers may have to wait longer for any relief through rate rationalisation. “You should remember that rate rationalisation under new tax regime took place only last year. It is necessary to evaluate the impact of changes made and one year time is too little to evaluate this. Making change in tax rates so quickly will not be in the interest of tax stability and tax certainty,” Malhotra said.

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Share in total tax collection

Data also showed that share of direct taxes in total tax collection is set to touch highest in 14 years. While share of direct taxes is estimated to be 56.6 per cent at the end of FY24, it will be highest after 60.8 per cent achieved in FY 2009-10. Also, it will be the second highest in 24 years. Barring FY 2016-17 and FY 2020-21, direct tax collection has always been higher than indirect tax collection since FY 2007-08

One of the reasons for higher share of direct taxes in overall tax collection during recent years is reduction in central excise duty twice during the last 4 years. Also, because of the reduction in both import and export on account of various geo-political reasons, mobilisation through custom duty has been effected. Meanwhile, one good news on indirect taxes front has been robust GST collection.

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