Personal income and corporate tax collections are likely to rise to more than ₹19 lakh crore in 10 years of Prime Minister Narendra Modi-led Government, providing more leeway to come out with people-friendly tax measures.
Driven by the increasing income of individuals, net direct tax collections after adjusting for refunds increased from ₹6.38 lakh crore in FY 2013-14 to ₹16.61 lakh crore in FY 2022-23.
In the current financial year, the collections from net direct taxes — personal income tax and corporate tax — have so far grown by 20% and at this pace, the mop-up is likely to be around ₹19 lakh crore in the fiscal ending on March 31, 2024.
The projected amount will exceed the estimate of ₹18.23 lakh crore in the 2023-24 Budget.
Over the years, the Government has been trying to make the tax regime simpler with lower rates and fewer exemptions. In 2019, the Government offered a lower rate of tax for corporate’s who forego exemptions. Similar scheme was introduced for individuals in April 2020.
The new income tax regime for individuals was made more attractive in the 2023-24 Budget by rationalising the tax slabs, raising basic exemption limit to ₹3 lakh and including standard deduction of ₹50,000. It has also been made the default tax regime in the income tax return form.
However, the Government’s proposal during the year to include credit card spending in foreign currency under RBI’s Liberalised Remittance Scheme’s (LRS) annual limit of $2.50 lakh per person faced a strong backlash. The move to bring foreign credit card spends under LRS would have also meant that Tax Collected at Source (TCS) would be required to be deducted at the time of making payments.
Banks also conveyed that there would be compliance issues while deducting the TCS and subsequently, the Government had to defer the implementation of the proposal.
Indicating widening of tax base subsequent to various reform measures put in place by the Income Tax Department, the number of ITRs filed by individual taxpayers increased from 3.36 crore in 2013-14 to to 6.37 crore in 2021-22 registering an overall increase of 90%. In 2023-24, 7.41 crore returns have been filed till October 26, 2023, including 53 lakh returns by first-time filers.
On February 1, the Government will present a vote on account as general elections are due in April-May. The full Budget is likely to be presented in July, 2024, by the new Government to be formed after the elections.
Prime Minister Narendra Modi-led Government came to power in 2014.