Trends in Tax Collection

According to data released by the Central Board of Direct Taxes (CBDT), the contribution of direct taxes to total tax revenue climbed to 56.72 per cent in 2023-24, the highest in 14 years.

Key highlight of the Trends in Tax Collection

In FY24, the contribution of direct taxes to total tax revenue reached 56.72%, the highest in 14 years.
The direct tax-to-GDP ratio also hit a two-decade high of 6.64%.
Personal income tax collections exceeded corporate tax collections for the second consecutive year.
Tax buoyancy has increased to 2.12 in FY24, compared to 1.18 in FY23.
The cost of tax collection dropped to 0.44% of total tax collections, the lowest since 2000-01.

Related Terms

● Direct Tax: It is a tax paid directly by the taxpayer to the government. In direct tax point of incidence and point of impact of a tax are the same.

○ E.g. Individual income tax, Corporate income tax, Capital gains tax etc.

○ Direct Taxes in India are administered by the Central Board of Direct Taxes (CBDT).

● Corporate Tax: It is a direct tax imposed by the government on the income or profits earned by a corporation.

● Tax Buoyancy Ratio: It is the ratio of change in tax revenue to the change in gross domestic product (GDP) of an economy. It measures how responsive a taxation policy is to growth in economic activities.

● Tax to GDP Ratio: It is an economic indicator that measures the proportion of a country’s total tax revenue relative to its Gross Domestic Product (GDP).

○ A higher ratio indicates the government is effectively collecting more direct taxes from its citizens.

UPSC PYQ

Q. Consider the following statements: (2017)

Tax revenue as a percent of GDP of India has steadily increased in the last decade.
Fiscal deficit as a percent of GDP of India has steadily increased in the last decade.

Which of the statements given above is/are correct?

(a) 1 only

(b) 2 only

(d) Neither 1 nor 2

Answer: D