Tax mop-up: the back story and the year ahead

livemint.com:

Mint looks at what catalysed the mop-up, its benefits and the outlook for next year. As of 10 February, the net collection of direct tax (after adjusting for refunds) has increased by 20.25% and stood at ₹15.6 trillion. This is already 80% of the revised budget estimate of ₹19.5 trillion with two months still left to go in the financial year 2024.

The earlier budget estimate was for ₹18.23 trillion. This increase was fuelled by personal income tax payments which grew by around 27%. Corporate income tax also registered a growth of 13.6%.

As a percentage of GDP, direct tax collection in FY24 is estimated at 6.6% which is significantly higher than 6.1% in FY23 and 4.8% in FY21. Firstly, the tax base has grown, made possible by the greater formalization of the economy. Better compliance has been triggered by the use of technology in tax administration.

According to the Press Information Bureau, a record 81.8 million income tax returns (ITR) had been filed for assessment year 2023-24 as of 1 January, 2024. In fact, ITRs filed by individual taxpayers have increased 90% in the last nine years. The government has also expanded the scope of tax collected at source.

Finally, economic growth has boosted corporate profits and made for higher corporate tax collection. Higher direct tax collection has boosted government revenue. This, along with some expenditure trimming, has enabled it to reduce the FY24 fiscal deficit to 5.8% as against 5.9% originally budgeted, setting the stage for faster fiscal consolidation.

Higher revenue has also helped it cut its borrowing requirement for FY24 from ₹17.86 trillion to ₹17.34 trillion. The government expects buoyancy in direct tax collection to continue. It has pegged direct tax collection in