Net direct tax collection surged by 22 per cent to reach ₹10.5-lakh crore between April 1 and November 9, the Finance Ministry reported on Friday. With this number and a strong growth in goods and services tax (GST), the government is hopeful of meeting its fiscal deficit target for the current fiscal year.
Direct taxes include personal income tax (PIT) and corporate income tax (CIT), besides taxes such as securities transaction tax (STT).
Although the Finance Ministry statement was not specific, officials listed three reasons for the rise: better compliance, profitability of the corporate sector, and a rise in the income of salaried and other individuals. Recovery in the economy has been key to growth in all taxes, officials added.
The Ministry said that net direct tax collection (subtracting refunds from gross collection) stood at ₹10.60 lakh crore, which is 21.82 per cent higher than the net collection for the corresponding period of last year, which was around ₹8.70 lakh crore. This collection is 58.15 per cent of the total Budget estimates for direct taxes for FY24. The statement also highlighted that the net growth in CIT collections is 12.48 per cent and that in PIT collections is 31.26 per cent (including STT).
The Budget estimated net direct tax collection at ₹18.22-lakh crore, which requires growth. This is around 28 per cent higher than the Budget estimate for FY23 and around 10.4 per cent of the revised estimate. With the kind of rise seen till date, officials expect net collection at the end of fiscal year to exceed the budget estimate by a good margin.
Gross collections during April 1–September 9 were at ₹12.37-lakh crore, which is 17.59 per cent higher than the gross collections of ₹10.52-lakh crore for the corresponding period of last year. The growth rate for CIT is 7.13 per cent, while that for PIT was 27.98 per cent (including STT). Refunds amounting to ₹1.77-lakh crore have been issued during April 1–November 9, the statement added.
“The direct tax collections numbers have again put India at the forefront, and it is expected that the collections will again surpass the budgetary estimates,” said Amit Singhania, Partner with Shardul Amarchand Mangaldas & Co.
Rohinton Sidhwa, Partner, Deloitte India, said that while PIT collections are registering more than 30 per cent growth, CIT collections still need to be picked up. “A clearer picture should emerge once the filing season concludes at the end of November. The general expectation is that the recent SC wins the department has had will also add to tax collections for the current year,” he said.
Along with direct tax collections, GST is also showing very strong growth. Data showed that GST collection surged to the second-highest all-time collection of ₹1.72-lakh crore in October. Now, e-way bill generation ), has jumped to an all-time high of over 10 crore in October, giving an indication of improved collection during November, the date for which will be made public on December 1.
All these are expected to help limit the fiscal deficit to the budget estimate of 5.9 per cent. However, there are risks, such as higher expenditure on the rural employment guarantee scheme, fertiliser subsidies, and food subsidies.