Centre expects to exceed gross direct tax collection target for FY25

Actual tax liability declined by 40% for those earning between Rs 10-20 lakh

Ahead of the presentation of the FY26 Budget in February, government sources said they not only expect to meet the Rs 22 trillion gross direct tax collection target for FY25, but also exceed it given the robust trend so far.

 

“Gross collections have not come down. It is because of higher refunds that net collections have slowed down. The way the economy is doing and the way the collections are growing, we are hopeful that we will not only meet the target but also exceed it,” the source said.

 

Data released by the finance ministry up to 10 November of FY25 showed gross direct tax collections grew 21.2 per cent to Rs 15.02 trillion, which is higher than the 12.8 per cent growth budgeted for FY25. However, net direct tax collections grew only by 15.41 per cent to Rs 12.1 trillion due to a jump in refunds by 53.1 per cent during the same time period. 

 

The source said in the latest data, instead of the “personal income tax” nomenclature, “non-corporate tax” nomenclature has been used as the category includes taxes paid by individuals, Hindu Undivided Families, firms, body of individuals, association of persons, local authorities and artificial judicial persons.

 

 “A narrative was being made that only individual taxpayers were driving tax collections, signalling a rising tax burden, which is not true. There is a substantial reduction of tax burden on people earning income less than Rs 20 lakh, that is the middle-class group,” the source said.

 

The official said adjusted to inflation, there is almost a 60 per cent decrease in taxes liability by those earning between Rs 10-20 lakh and a 40 per cent decrease in actual taxes liability by those earning between Rs 10-20 lakh.

 

The average income tax paid annually by those earning between Rs 15-20 lakh came down from Rs 4.1 lakh in FY14 to 1.7 lakh FY24, the source said.

 

“Due to the strong anti-tax evasion and black money laws, better enforcement which is non-invasive, there has been almost a five times increase in returns being filed by those earning above Rs 50 lakh in the last 10 years. About 76 per cent of income-tax collected is from those earning above Rs 50 lakh. This has led to reduced tax burden on the middle-class,” the source added.

 

The number of income-tax return filers has doubled between FY14 and FY24 to 7.9 crore.

 

Asked on the status of the comprehensive review of the income tax act announced in the budget, the official said: “We are working on that. So far over 6,000 suggestions have been received.”