Income taxes to fetch a big chunk of govt revenues

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₹10.4 trillion, while personal income tax is projected to grow 13% to ₹11.6 trillion. Centre’s GST collection is expected to grow at 11.6% to ₹10.7 trillion in FY25. However, customs duty receipts are expected to grow at a much slower 5.7%, and excise duty receipts at just 4.9%.

“The increase in share of direct taxes in gross tax collection is a reflection of the buoyancy and acceleration seen in direct tax collections. In the past, direct tax regime has seen a major effort to ramp up to compliance, a shift away from tax exemptions and administrative initiatives such as faceless assessments. The growth in corporate profits, too, has helped in the direct tax collection growth," said Suranjali Tandon, associate professor at National Institute of Public Finance and Policy.

Direct taxes are collected based on an assessee’s ability to pay and the outgo is structured to increase as the income level progresses, leading to those in higher income brackets paying more. This aligns with the ideas of equity and social justice, while indirect taxes apply to the rich and the poor alike but leads to a higher burden on those in the lower income bracket relative to their income. So, when India rolled out GST in 2017, it opted for four different rates to make the tax structure as progressive as possible.

Excise duty collection in the current fiscal is impacted by two factors and it has accordingly been revised down in the interim budget’s revised estimates. “There was an excise duty rate cut in May 2022, and on the windfall tax, we have not been able to get as much," Malhotra said, referring to the benign global oil price now. So far in FY24, average price of Indian basket of crude oil stood at $82.12 a barrel, compared with $93.15 in