New Delhi: Net direct tax collections in FY24 jumped 22% from a year earlier to touch ₹10.6 trillion, official data released on Friday showed, creating additional spending room for the government in an election year. Provisional data till 9 November showed the government has so far collected 58% of the ₹18.2 trillion budgeted for FY24.
New Delhi: Net direct tax collections in FY24 jumped 22% from a year earlier to touch ₹10.6 trillion, official data released on Friday showed, creating additional spending room for the government in an election year. Provisional data till 9 November showed the government has so far collected 58% of the ₹18.2 trillion budgeted for FY24.
Gross direct tax receipts (without adjusting for refunds of ₹1.77 trillion) were ₹12.37 trillion, 18% above last year's ₹ 10.52 trillion.
Tax collections that are expected to beat budget estimates may help the government meet its fiscal deficit target and create space for welfare spending, economists said, despite limited progress on the disinvestment front.
Gross goods and services tax (GST) revenues grew strongly in October, with tax collections rising at a 10-month-high pace of 13.4% to hit the second-highest monthly tally of ₹1.72 trillion. Direct tax collections may surpass budgetary estimates yet again, said Amit Singhania, partner, tax, Shardul Amarchand Mangaldas & Co.
Out of the total net direct tax collections, net corporate tax and personal income tax collections rose 12.5% and 32%, respectively. Net collection of personal income tax and securities transaction tax (STT) rose 31%.
Net direct tax collections in FY23 stood at ₹ 16.61 trillion, up 17.6% from FY22's ₹ 14.12 trillion, exceeding both budget and revised estimates. In FY22, net direct tax collections reached ₹14.09 trillion against ₹ 9.45 trillion in the covid year of FY21, a growth of 49%.
"While personal income tax collections are registering over a 30% growth, corporate income tax collections still need to pick up. A clearer picture should emerge once the filing season concludes at the end of November," said Rohinton Sidhwa, partner, Deloitte India.
The Centre has set a target of ₹9.2 trillion for corporate tax collection and ₹9 trillion for personal income taxes for FY24.
Direct taxes collected during the second quarter have been stronger than in the first, and if this trend continues, experts expect the government to exceed its targets.
The Centre is unlikely to meet its ₹51,000 crore disinvestment target for the year as big-ticket divestment plans, including that of IDBI Bank, are unlikely to be completed this year.
However, higher tax revenue and non-tax revenues, including higher dividends from the Reserve Bank of India and likely higher dividends from banks, may help.
The Centre aims to narrow the fiscal deficit—the difference between its income and spending—to 5.9% of gross domestic product in FY24. Buoyant direct tax collections will help the government meet its fiscal deficit target, which is crucial as it may not meet its divestment target and incur additional expenditure in the form of fertilizer subsidy, cooking gas subsidy and MNREGA ahead of the general elections slated next year, said Devendra Kumar Pant, chief economist, India Ratings & Research.
"We expect a similar trend (high direct tax collection) to follow in the coming quarters. The additional tax revenue will bridge the shortfall," Pant added.
The higher-than-expected revenue also means the Centre can direct some proceeds towards developmental schemes without having to worry about breaching the fiscal deficit. Government spending will be key for India's economic growth, as private spending is yet to pick up in a big way.
The Reserve Bank of India has estimated India's growth at 6.5% for FY24. The Indian economy expanded 7.8% in the first quarter of FY24, up from 6.1% during the previous quarter, on higher government -expenditure and strong services growth.