Higher personal income tax collections could bolster direct tax collections by Rs 13,000 cr for FY25

Right now Rs 22.37 lakh crore is the revised estimate for FY25.

India’s direct tax collections for the fiscal year 2024-25 (FY25) are likely to exceed the budget's revised estimate (RE) of Rs 22.37 lakh crore by approximately Rs 13,000 crore, a senior government official said. The higher-than-expected collections underscore strong revenue buoyancy, primarily driven by improved personal income tax compliance and a steady expansion of the tax base.

The government had initially budgeted direct tax revenues at Rs 22.07 lakh crore in the budget estimate (BE) for FY25. However, given the strong trends in tax collection, the figure was revised upwards to Rs 22.37 lakh crore in the RE presented in the budget earlier this month.

“We can build up from the revised estimate of direct tax collection. Right now Rs 22.37 lakh crore is the revised estimate for FY25. It is likely to cross by about Rs 13,000 crore,” the official told Moneycontrol. The latest estimate suggests that actual collections will surpass even the RE, signalling strong economic activity and improved compliance, he said.

As on February 10, net direct tax collections had already reached Rs 17.78 lakh crore, reflecting a 14.69 percent year-on-year increase. Gross direct tax collections stood at Rs 21.88 lakh crore, marking a 19.06 percent growth compared to the previous year, according to government data. A breakdown of the collections shows that net corporate tax revenue reached Rs 7.78 lakh crore, registering a growth of 6.1 percent, while net personal income tax collections surged by 20.9 percent to Rs 9.48 lakh crore. Additionally, securities transaction tax collections rose sharply by 65.05 percent to Rs 49,201 crore.

The stronger-than-anticipated direct tax inflows provide the government with additional fiscal room. It could help in meeting the fiscal deficit target while also supporting government spending on infrastructure and social sector programmes. The fiscal deficit for FY25 has been estimated at 4.8 percent of GDP, and robust tax collections could aid in achieving fiscal consolidation without cutting down on crucial expenditures.

The government also announced tax relief in the recent budget. Budget 2025 proposed a revenue forgone of nearly RS 1 lakh crore due to various direct tax concessions aimed at boosting consumption, particularly among middle-class taxpayers.

With tax collections surpassing expectations, a continued focus on digital tax administration, improved taxpayer services and economic expansion are expected to sustain momentum in the coming fiscal year.