Direct tax-GDP ratio in FY23 rises to 6.1%, the highest in 15 years

Direct tax revenues as a share of gross domestic product (GDP) rose to 6.1% in fiscal 2023, the highest since 2007-08, time series data released by the Central Board of Direct Taxes showed.

Data showed that in the past nine years, net direct tax collections have more than doubled from ₹6.39 trillion in fiscal 2014 to ₹16.64 trillion (provisional) in fiscal 2023.

Personal income tax constituted a major chunk of net direct tax collections at ₹8.33 trillion, followed by corporate taxes at ₹8.26 trillion and other direct taxes at ₹4,545 crore. Securities transaction tax has been included in personal income tax

The number of taxpayers, or those either filing income returns or having taxes deducted at source but not filing returns, increased to 93.7 million in the past fiscal from 52.6 million in 2013-14.

The total number of income tax return filers has doubled to 77.8 million in fiscal 2023 from 37.9 million in fiscal 2014, the data showed.

Maharashtra reported the highest direct tax collections of ₹6.06 trillion in fiscal 2023, up from ₹5.24 trillion in the previous fiscal, followed by Delhi with ₹2.22 trillion in fiscal 2023.

As a share of the total direct taxes, Maharashtra led with a 36.4% share, followed by Delhi at 13.3%, Karnataka at 12.5%, and Tamil Nadu at 6.4%. Collectively, the four states contributed almost 70% of the overall direct tax collections in fiscal 2023.

Direct taxes, totaling ₹16.64 trillion, account for 54.6% of the overall tax revenues of ₹30.45 trillion, with indirect taxes contributing ₹13.82 trillion.

The share of direct taxes in overall taxes has gradually been climbing since the pandemic. From 46.84% in fiscal 2021, the proportion of direct taxes rose to 52.27% in fiscal 2022, before climbing further to 54.62%.

The tax buoyancy, a measure of tax revenue response to gross domestic product (GDP) growth, was 1.18, suggesting that tax revenues grew slightly faster than the GDP.

A buoyancy factor greater than one indicates that tax revenue is growing at a faster rate than the GDP, reflecting an efficient tax system and a robust economy.

Tax buoyancy, which was at 2.52 in fiscal 2022, fell to 1.18 in fiscal 2023, despite a 17.80% growth in taxes and 15.11% nominal GDP growth, data showed. Tax buoyancy was not computed for fiscal 2021 as both GDP growth rates were negative.