Direct Tax to GDP Ratio Rose to 15-year high in FY23

January 24, 2024

Context:

The Central Board of Direct Taxes (CBDT) under the Ministry of Finance has released time-series data

India’s Direct Tax to GDP Ratio Reaches 15-Year High of 6.11% in FY23

Direct tax collections: It accounted for 54.62 per cent share in the overall tax collections by the government in FY 2022-23, a four-year high.
- Net Direct tax Collections (reflect collections after refunds): It increased by 160.52 per cent to Rs 16.63 lakh crore in FY 2022-23 from Rs 6.39 lakh crore in FY 2013-14. On a year-on-year basis, there was an increase of 17.8 per cent.
- Gross direct tax collections: It was Rs 19.7 lakh crore in FY 2022-23, a rise of 173.3 per cent from Rs 7.21 lakh crore in FY 2013-14. Year on year it rose by 20.5 per cent.
- A higher direct taxes-to-indirect taxes ratio is considered progressive as indirect taxation hurts the poor more than direct taxes.
Direct tax to GDP ratio (reflects the share of taxes in the overall output generated in the country): It rose to a 15-year high of 6.11 per cent in the financial year 2022-23.
Income tax return filers: It was 7.4 crore in FY23, ( out of which 6.97 crore were individuals) an increase of 6.3 percent from FY22.
Tax buoyancy (It is the growth rate of taxes in relation to the economy’s nominal GDP): It declined to 1.18 in 2022-23 from 2.52 in 2021-22 (low base effect) and 1.29 in the pre-Covid year of 2018-19.
- A tax buoyancy greater than 1 reflects a faster growth in taxes as against the country’s national income.
Growth rate for taxes: It is 17.79 per cent in 2022-23, higher than 15.11 per cent nominal GDP growth.
The cost of tax collection (It is the expenditure on tax collection as a proportion to the total tax collections): It was 0.51 per cent in FY23, the lowest level since 2000-01 but in absolute terms, it increased to Rs 8,452 crore, the highest level since 2000-01.
Amongst States and Union Territories:
- Maharashtra leads with 36.4 per cent (Rs 6.05 lakh crore) of the overall direct tax collections in the country in the financial year 2022-23,
- Delhi at 13.3 per cent (Rs 2.22 lakh crore), Karnataka at 12.5 per cent (Rs 2.08 lakh crore) and Tamil Nadu at 6.4 per cent (Rs 1.07 lakh crore). Cumulatively, these four states accounted for 68.6 per cent of the overall direct tax collections in FY23.

Direct Tax

It is a tax levied directly on a taxpayer’s income, profit or revenue who pays it to the Government and cannot pass it on to someone else.
Examples: Income tax, Corporate Tax, Securities Transaction Tax

Indirect Tax

It is a tax levied by the Government on goods and services consumed by an individual and it can be shifted from one taxpayer to another.
Examples: GST, Service Tax, VAT etc

Who is a taxpayer?

As per CBDT, a taxpayer is a person who either has filed an Income Tax Return or in whose case tax has been deducted at source but the taxpayer has not filed the return of income.

Also Read: India GDP Growth Rate, Trends And Analysis

News source: The Indian Express

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