India’s direct tax collection for FY25 is set to surpass the government’s ambitious target of US$ 261.52 billion (~Rs. 22,07,000 crore), according to an announcement by CBDT Chairman Mr. Ravi Agarwal. As of November 10, 2024, the net direct tax collection has grown by 15.41%, amounting to US$ 143.50 billion (~Rs. 12,11,000 crore). This robust growth is underpinned by increased receipts from both corporate and non-corporate taxes.

Growth Driven by Corporate and Non-Corporate Tax Collections

Corporate tax collections reached US$ 60.43 billion (~Rs. 5,10,000 crore), reflecting a substantial contribution to overall revenues. Non-corporate taxes, which encompass payments from individuals, Hindu Undivided Families (HUFs), and firms, amounted to US$ 78.45 billion (~Rs. 6,62,000 crore). Additionally, the Securities Transaction Tax (STT) for this period was US$ 4.26 billion (~Rs. 35,923 crore), highlighting the significant role of financial market activities in boosting revenue.

The government’s target for FY25 includes US$ 120.87 billion (~Rs. 10,20,000 crore) from corporate tax and US$ 140.66 billion (~Rs. 11,87,000 crore) from personal income tax and other tax categories. Given the current trajectory, India is well on its way to surpassing these benchmarks, underscoring the resilience of its tax administration system and the economic environment.

Compliance on Foreign Income and Asset Disclosures

To enhance compliance, the CBDT has urged taxpayers to disclose foreign income or assets in their Income Tax Returns (ITRs). Taxpayers who failed to report such income for FY23 have until December 31, 2024, to file revised returns. Notifications are being sent via SMS and email to those with high-value foreign assets, with the tax department leveraging its automatic exchange of information agreements with other countries to verify these disclosures.

This initiative reflects India’s commitment to ensuring transparency in tax compliance and curbing tax evasion through robust international cooperation.

Review of the Income Tax Act 1961

In a move to modernise India’s tax framework, over 6,000 suggestions have been received as part of the Income Tax Act 1961 review. The government aims to:

• Simplify the language of tax laws.
• Reduce litigation through clearer provisions.
• Eliminate obsolete sections that no longer align with current economic practices.

The reform initiative seeks to make the Income Tax Act more transparent and taxpayer-friendly, thereby reducing ambiguities that often lead to disputes. This overhaul is part of the broader effort to align tax laws with the needs of a modern economy, fostering greater compliance and trust.

Implications for FY25 and Beyond

The strong growth in direct tax collections not only bolsters India’s fiscal health but also reinforces the government’s ability to fund development initiatives and public services. With tax revenues showing consistent growth, the government can focus on improving infrastructure, welfare schemes, and initiatives to sustain economic growth.

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