A rise in India’s net direct tax collections
Context
A recent data revealed that India’s net direct tax collections have risen by 16.5%, crossing ₹15.82 lakh crore as of December 17, 2024, with non-corporate taxes driving the growth.
Relevance:
GS03 (Economy)
Key Highlights:
- Contributions from individuals and HUFs also grew by 22.5%. This collection surpassed corporate tax collections.
- Non-corporate collections totalled ₹7.97 lakh crore, compared to corporate receipts of ₹7.43 lakh crore.
- Corporate tax receipts increased by 8.6%, significantly lower than the growth rate of non-corporate taxes.
- Strong Securities Transaction Tax (STT) receipts saw an 85.5% jump. It reached over ₹40,100 crore.
- Tax refunds were seen increasing by 42.5% to ₹3.39 lakh crore, with corporate tax refunds jumping 70.3% and non-corporate refunds rising by 19.8%.
- Advance tax receipts grew by 20.9%, crossing ₹7.56 lakh crore. Non-corporate taxes increased by 35%, while corporate taxes grew at a slower rate of 16.7%.
Direct Tax
- It is that tax where the individual or entity on whom it is levied bears the entire burden.
- The tax burden cannot be transferred; i.e., the impact and incidence of the tax fall on the same person or entity.
- In India, it is managed by the Central Board of Direct Taxes (CBDT), under the Department of Revenue within the Ministry of Finance.
- Examples of direct taxes include:
- Income Tax (IT)
- Corporate Tax
- Minimum Alternate Tax (MAT)
- Alternate Minimum Tax (AMT)
- Capital Gains Tax (CGT)
- Securities Transaction Tax (STT)
- Dividend Distribution Tax (DDT)
- Wealth Tax
- Banking Cash Transaction Tax (BCTT)
- Digital Tax (e.g., Google Tax or Equalization Levy)
- Features of Direct Tax
- It is imposed directly on the earnings of individuals or businesses, rather than on goods or services.
- The taxes are paid directly to the government, unlike indirect taxes collected through intermediaries like sellers.
- Progressive Structure: They are progressive in nature. It means the tax rate increases with higher income levels.
- Limited Tax Base: Direct taxes apply only to incomes above a specified threshold, resulting in a relatively narrow base.
Indirect Tax
- Indirect tax is a tax levied by the government on goods and services and not on the income, profit, or revenue of an individual.
- They are usually levied on a manufacturer or a supplier, who then passes the tax on to the end customer.
- Unlike direct taxes, which have a limited tax base, indirect taxes are applied to everyone who purchases products or services and are levied automatically on products and services.
- It is proportional in nature and has the effect of raising the price of the products on which they are imposed.
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