Indian economy soars: Direct tax-to-GDP ratio reaches 6.11%

The direct tax-to-Gross Domestic Product (GDP) ratio in India has soared to an unprecedented 6.11% at the end of the fiscal year 2022-23, according to detailed data released on Tuesday by the Central Board of Direct Taxes (CBDT). Simultaneously, the report unveiled that the cost of tax collection has reached its lowest level since the fiscal year 2014-15, showcasing a remarkable achievement in the country's financial management.The previous highest of direct taxes-to-GDP ratio was 6.3 per cent in 2007-08. This is the third time in the last 22 financial years when the ratio has crossed six per cent level,according to estimates.
Further data highlighted that the total number of Income Tax Returns (ITR) filed in FY23 stood at 7.78 crore, showing over 104 per cent growth as compared to total number of ITRs of 3.80 crore filed in FY14. In the current fiscal, the number of returns have already crossed 8 crore.
Meanwhile, the cost of collection has also come down. Data showed that the cost of collection decreased to 0.51 per cent in FY23 as compared to 0.57 per cent of total collection in FY24. Officials credit better tax administration along with use of technology for collecting more at lower cost.

With the current momentum, economists and financial analysts are optimistic about the trajectory of the full fiscal year, anticipating that the current pace of collection could surpass the budget estimates. If the trend continues, it could result in a surplus in direct tax revenue, offering the government additional fiscal leeway for targeted investments and expenditure.

(Ira Singh, Asstt Editor, Gandhinagar)