Personal income tax now does the heavy lifting in direct tax collections
₹7 lakh from ₹5 lakh earlier to increase its adoption. In value terms, personal income collections after refunds stood at ₹10.44 trillion in 2023-24, growing at 25.23%.
On the other hand, corporate tax receipts were ₹9.11 trillion, backed by growth of 10.26% year-on-year. Comparatively, total indirect tax collections in 2023-24 are expected to be at ₹14.83 trillion, with a growth of 7%, as per the revised estimates.
Experts attributed the trend to corporate tax rate cut in 2019, shifting dividend distribution tax (DDT) from the company to the shareholder in 2020, buoyant equity markets boosting securities transaction tax (STT) collections (which is included in personal income tax receipts), extensive technology-driven oversight of transactions in the economy by the income tax department, pre-filled income tax returns, e-verification of transactions, and the facility for updating tax returns. Audit and consulting firm EY said in an analysis shared with Mint that higher individual incomes due to economic growth, tech-driven tax administration and more individuals entering the tax net after the 2017 GST (goods and services tax) rollout, which contributed to the economy’s formalization, have aided in personal income tax collection exceeding corporate tax collections.
“The ideal tax structure varies depending on the economic situation of a country," said Sameer Gupta, national tax leader, EY India. “OECD (Organisation for Economic Co-operation and Development) estimates for tax structures for 2021 indicate that OECD countries rely more on personal income tax and social security contributions (contributing 24% and 26%, respectively, to the total tax collections), whereas corporate income tax collections contributed only 10%."
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