Direct Tax-to-GDP Ratio Hits 23-Year High in FY23: CBDT Report

The Central Board of Direct Taxes (CBDT) released data, revealing that the direct tax-to-GDP ratio for the fiscal year 2022-23 (FY23) reached a remarkable 23-year high, standing at 6.11%. This surge was attributed to a substantial increase in direct tax collections by the government.

Key Points

1. Year-on-Year Growth: Direct tax collections witnessed a robust year-on-year growth of 17.8%, totaling Rs 16.6 trillion in FY23. Notably, corporate tax collections reached Rs 8.26 trillion, marking a 16% increase, while income tax collections stood at Rs 8.33 trillion, reflecting a significant 19.6% YoY growth.
2. Buoyancy Shift: Despite the impressive overall performance, the direct tax buoyancy, which measures the rate of tax revenue growth compared to nominal GDP growth, declined to 1.2 in FY23 from 2.5 in FY22. However, the first half of FY24 saw a resurgence, with direct tax buoyancy at 3.0, driven by a sharp rise in income tax collections. Income tax buoyancy and corporate tax buoyancy came in at 3.6 and 2.3, respectively.
3. Contribution to Total Tax Mop-up: The government’s direct tax collections contributed significantly to the total tax mop-up, reaching a four-year high of 54.62% in FY23, up from 52.27% in FY22, as per CBDT data.
4. Cost of Collection: The cost of collection in relation to direct tax mop-up reached its lowest point in 23 years, standing at 0.51% in FY23. This suggests an efficient tax collection process.
5. Increased Tax Filing: The total number of income tax returns filed in FY23 rose to 77.82 million, compared to 73.05 million in FY22, indicating an upward trend in tax compliance.

Key Takeaways for Competitive Exams:

• FY23 witnessed India’s direct tax-to-GDP ratio at a 23-year high of 6.11%.
• Direct tax collections rose by a robust 17.8% to reach Rs 16.6 trillion.
• Corporate tax collections amounted to Rs 8.26 trillion, up 16% YoY.
• Income tax collections stood at Rs 8.33 trillion, marking a significant 19.6% increase.
• Direct tax buoyancy declined to 1.2 in FY23 from 2.5 in FY22 but rebounded to 3.0 in H1 FY24.
• Government’s direct tax contributions to total tax mop-up reached a four-year high of 54.62% in FY23.
• The cost of collection in relation to direct tax mop-up reduced to the lowest in 23 years at 0.51%.
• The total number of income tax returns filed rose to 77.82 million in FY23, indicating increased tax compliance.

Important Questions Related to Exams

1. What was India’s direct tax-to-GDP ratio in FY23?
2. How much did India’s direct tax collections increase year-on-year in FY23?
3. What was the total corporate tax collections in FY23?
4. By what percentage did income tax collections grow in FY23?
5. What was the direct tax buoyancy in FY23?
6. How much did the government’s direct tax contributions increase in FY23?
7. What was the cost of collection in relation to direct tax mop-up in FY23?
8. How many income tax returns were filed in FY23?
9. What is the direct tax buoyancy in H1 of FY24?
10. What percentage of total tax mop-up did the government’s direct tax collections contribute in FY23?

Kindly share your responses in the comment section!!