Direct tax-to-GDP ratio scales 15-year high of 6.11% in FY23

The data on direct taxes comes just a week before Finance Minister Nirmala Sitharaman presents the interim Budget for 2024-25 in Parliament on February 1.

India's direct tax-to-GDP ratio hit a 15-year high of 6.11 percent in 2022-23, hovering near its peak of 6.3 percent reached in 2007-08, according to data released by the Central Board of Direct Taxes (CBDT).

The data, released late on January 23, showed that the contribution of direct taxes – which majorly comprises corporate tax and personal income tax – to total tax collections has reached the pre-pandemic levels. In 2022-23, direct taxes made up 54.62 percent of the government's total tax revenue, up from 52.27 percent in 2021-22 and 46.84 percent in 2020-21 – the lowest in 15 years.

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According to Moneycontrol's calculations, if the central government meets its budget estimates for 2023-24, the direct tax-to-GDP ratio could rise further to around 6.2 percent. However, economists expect the government to exceed its budget estimates of Rs 9.23 lakh crore for corporate tax and Rs 9.01 lakh crore for personal income tax. A snap-poll of 10 economists' estimates suggest that the direct tax-to-GDP ratio could reach an all-time high of 6.5 percent this year.

Some of the other findings of the CBDT's Consolidated Time Series Data from 2000-01 to 2022-23 also include:

>> The government spent Rs 8,452 crore in collecting direct taxes in 2022-23, up from Rs 7,479 crore in 2021-22. However, the efficiency of tax collections improved, with the cost of collection decreasing to 0.51 percent of total collections in 2022-23 from 0.53 percent the year before that.

>> A total of 7.78 crore income tax returns were filed in 2022-23, up 6.5 percent from the number filed in 2021-22. Income tax returns filed by individuals make up the majority, with 2022-23 seeing 7.33 crore such returns being filed by this category.

>> The total number of taxpayers, including individuals, in India increased by 7.8 percent to 9.34 crore for the assessment year 2022-23. Here, a taxpayer is any person who has either filed a return of income for the assessment year or where tax has been deducted at source in the relevant financial year but the taxpayer has not filed an income tax return.