As the current fiscal year progresses, net direct tax collections, encompassing personal income tax and corporate tax, show a growth of 20%, projecting a total collection of over ₹19 lakh crore by March 31, 2024. This anticipated amount exceeds the estimated ₹18.23 lakh crore in the 2023-24 Budget.
The government’s efforts to simplify the tax regime, offering lower rates and reducing exemptions, have contributed to the increasing income of individuals. Net direct tax collections, after adjusting for refunds, have risen from ₹6.38 lakh crore in FY 2013-14 to ₹16.61 lakh crore in FY 2022-23.
In the recent 2023-24 Budget, the government further enhanced the attractiveness of the new income tax regime for individuals by rationalizing tax slabs, raising the basic exemption limit to ₹3 lakh, and including a standard deduction of ₹50,000. These changes aim to promote ease of tax filing, with the new income tax regime becoming the default option in the income tax return form.
The government’s initiative to include credit card spending in foreign currency under RBI’s Liberalised Remittance Scheme’s annual limit of USD 2.50 lakh faced backlash and was deferred due to compliance issues.
Indicating a widening tax base, the number of individual taxpayers filing Income Tax Returns (ITRs) increased from 3.36 crore in 2013-14 to 6.37 crore in 2021-22, marking a 90% overall increase. In the current fiscal year, 7.41 crore returns have been filed, including 53 lakh returns by first-time filers.
As the government approaches the vote on account on February 1, with general elections due in April-May, and the full Budget likely in July 2024, experts anticipate a continued focus on streamlining direct tax provisions. The digitalization of tax administrations and a focus on formalizing the economy are contributing to higher tax compliance rates.
With direct tax collections growing at about 20% in the current fiscal year and GST collections reaching new peaks, the trend is expected to continue in 2024, supported by a strong economic performance.
