The Centre’s direct tax-to-GDP ratio in the financial year reached the highest level in the millennium in FY24, if not the highest ever, reports FE. The ratio, which is a crucial determinant of the country’s ability to find resources for physical and social infrastructure projects, and the progressive nature of taxation, came in at 6.64% in the last financial year, up from 6.11% FY23 and 5.97% in FY21.

According to the time series data released by the government, since FY01, the previous high for the ratio was 6.3% in FY08.

To be sure, direct taxes accounted for 56.7% of the Centre’s total tax revenues in FY24, compared with just 46.8% in FY21, the pandemic year. An interesting feature is the sharp decline in share of corporate tax in direct tax receipts in recent years, while personal income tax collections have risen at a much faster rate.

Experts say this largely due to simplification of taxes and procedures, improved tax payer services, and higher tax compliance. Also, introduction of Annual Information System (AIS), third party data, updated returns have helped in increasing PIT collections.

“Strategic use of technology to decrease tax evasion in terms of e-proceedings, 360-degree profiling of taxpayers, integration of data from various sources such as banks, sub-registrar, is promoting correct reporting of Income in the tax returns,” said Akhil Chandna, partner, Grant Thornton Bharat (GTB).

Moreover, the widespread adoption of digital payments among the Indian population has significantly increased transparency in financial transactions. “As a result, many transactions that might have previously gone unnoticed are now being recorded and subjected to taxation,” said CA Suresh Surana.