In 2019, the government offered a lower rate of tax for corporations who forego exemptions.
Personal income and corporate tax collections are likely to rise to more than Rs 19 lakh crore during Prime Minister Narendra Modi's 10-year rule. This rise in income tax collections is due to the increasing income of individuals.
According to reports, net direct tax collections after adjusting for refunds have grown from Rs 6.38 lakh crore in FY 2013-14 to Rs 16.61 lakh crore in FY 2022-23. Furthermore, collections from net direct taxes, including personal income tax and corporate tax, have grown by 20 per cent so far in the current financial year.
Direct tax collections cross Rs 11 lakh crore in October, up 18% YoY: Fin Min
At this pace, the mop-up is likely to be around Rs 19 lakh crore in the fiscal ending on March 31, 2024, exceeding the estimate of Rs 18.23 lakh crore in the 2023-24 Budget.
The government has been trying to make the tax regime simpler with lower rates and fewer exemptions. In 2019, the government offered a lower rate of tax for corporations who forego exemptions. A similar scheme was introduced for individuals in April 2020. In the 2023-24 Budget, the new income tax regime for individuals was made more attractive by rationalising the tax slabs, raising the basic exemption limit to Rs 3 lakh, and including a standard deduction of Rs 50,000. It has also been made the default tax regime in the income tax return form.
However, the government's proposal to include credit card spending in foreign currency under RBI's Liberalised Remittance Scheme's (LRS) annual limit of USD 2.50 lakh per person faced a strong backlash from the public. The move to bring foreign credit card spending under LRS would have also meant that taxes collected at Source (TCS) would be required to be deducted at the time of making payments. Banks also conveyed that there would be compliance issues while deducting the TCS, and subsequently, the government had to defer the implementation of the proposal.
The number of ITRs filed by individual taxpayers has increased from 3.36 crore in 2013-14 to 6.37 crore in 2021-22, indicating a widening of the tax base after various reform measures put in place by the Income Tax Department. In 2023-24, 7.41 crore returns have been filed till October 26, 2023, including 53 lakh returns by first-time filers.
On February 1, the government will present a vote on account as general elections are due in April-May. The full Budget is likely to be presented in July 2024 by the new government to be formed after the elections. Lisation of the tax administrations and continued focus on formalisation of the economy have contributed to higher tax compliance rates.
It has been reported that direct tax collections have grown at around 20% in the current fiscal year (April-March), and the Goods and Services Tax (GST) collections have also been scaling a new peak every year. This trend is expected to continue in 2024 due to a strong economic performance. In April 2023, the monthly GST collection reached a high of Rs 1.87 lakh crore. The average gross monthly GST collection in 2023-24 stands at Rs 1.66 lakh crore, an 11% increase from the previous financial year.
The GST Council recently clarified that a 28% tax will be levied on the full amount put in at the time of entry into online gaming platforms. Additionally, the council has made it mandatory for all overseas online gaming companies to register with GST authorities. GST authorities have issued 71 show-cause notices to online gaming companies for alleged GST evasion of over Rs 1.12 lakh crore during financial years 2022-23 and 2023-24. Many of these companies have approached high courts seeking a stay on the demand.
FIRST PUBLISHED: DEC 29, 2023 11:15 AM.
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