Our mop-up of direct taxes is a clear sign of economic strength

Better tax administration and compliance played a role but let's thank the economy's momentum

- T.V. MOHANDAS PAI & NISHA HOLLA

India's direct tax collections have witnessed a remarkable upswing, underscoring its strong economic growth, improved compliance and better tax administration. With income tax collections scaling new highs, the latest data reaffirms the resilience of our tax base.

Personal income tax receipts have surged at a compounded annual rate of 22.8% to ₹12.57 trillion in 2024-25 from ₹8.33 trillion in 2022-23. This was driven by higher compliance, enhanced use of technology and more sophisticated data-collection mechanisms.

Despite cuts in tax rates and substantial refunds, corporate-tax receipts have also shown steady growth, rising a compounded annual 9% to ₹9.8 trillion in 2024-25 from two years ago. As a result, direct tax collections as a proportion of India's nominal GDP have climbed to 6.8% from 5.5% during this period.

Overall direct tax collections have shown a robust growth momentum. Gross direct tax revenue in 2024-25 has surged 16.15% from the previous year to ₹25.87 trillion, significantly outpacing India's nominal GDP growth. However, a sharp increase in tax refunds, which soared by 32.5% to ₹4.6 trillion, has tempered net collections—they are up 13.13% at ₹21.26 trillion in 2024-25.