India's direct tax collections double as incomes rise, compliance grows

Hans India

6 hours ago

India's total gross direct tax collections (before adjusting for refunds) have more than doubled in the last five years, reflecting the high economic growth and improved tax compliance in the country, which has been encouraged with the introduction of the new digital technology.
The increase in collections is backed by a 36 per cent jump in the number of Income Tax returns filed in the last 5 years, with around 9.19 crore ITRs submitted in FY 2024-25 compared to 6.72 crore in FY 2020-21 due to the robust expansion in the taxpayer base.
The country's total gross direct tax collection stood at Rs. 12.31 lakh crore in 2020-21, which rose to Rs. 16.34 lakh crore in the financial year 2021-22, figures compiled by the Finance Ministry show.
The trend continued in 2022-23 and 2023-24 as well, with the amount reaching Rs 19.72 lakh crore and Rs 23.38 lakh crore, respectively. This growth stems from a combination of economic recovery and improved efficiency in tax collection, according to an official statement.
By FY 2024-25, the total Gross Direct Tax Collections climbed to an impressive Rs 27.02 lakh crore, which showcases the strength of the Indian economy combined with improved taxpayer compliance and the government's actions to expand the tax base, the statement said.
The Indian tax ecosystem has witnessed remarkable growth through various technology-driven initiatives in a phased manner. The current series of PAN (10 digit alphanumeric) was launched in 1995 offering advantages like unique identification, information matching leading to widening of tax base. Linking of PAN with Aadhaar was undertaken in 2017 to improve compliance and eliminate duplication.
Further, in recent years, initiatives like the setting up of the Centralised Processing Centre (CPC) in 2009 and the TDS Reconciliation Analysis and Correction Enabling System (TRACES) in 2012 led to automated processing of ITRs and issuance of refunds and resolving mismatch of Tax Deducted at Source (TDS), respectively, the statement said.
The introduction of Tax Information Network (TIN) 2.0, a new tax payment platform, has been a trendsetter. With multiple payment modes, real-time credit of taxes, and faster processing of refunds, the department has not just streamlined the process but empowered taxpayers with greater flexibility and convenience, the statement said.
With the establishment of the Demand Facilitation Centre at Mysuru, a central repository for outstanding demand has been created, which is a single reference point for both the taxpayer as well as the departmental officer.
In the last decade, focusing on global technological revolutions, the Income Tax Department (ITD) launched PROJECT INSIGHT, building an integrated data repository, creating a "360-degree profile" of each taxpayer. This Data Warehousing and Business Intelligence platform represents a paradigm shift in how the department leverages data analytics for improving compliance and widening the tax base.
Further, the Faceless Assessment Scheme launched in 2019 targets to enhance transparency, efficiency, and accountability by eliminating the physical interface between the taxpayer (Assessee) and the tax officer (Assessing Officer) through features like Automated Random Allocation and Electronic Communication.
The Annual Information Statement (AIS) was implemented on the Compliance Portal of the Income Tax website on November 2021 which provides taxpayer's financial activities across the financial year, including records related to Tax Deducted at Source (TDS), Tax Collected at Source (TCS), stock market transactions, mutual fund investments, and other relevant financial data.
Besides, the introduction of pre-filled returns, facilitated by the Annual Information Statement (AIS) and Taxpayer Information Summaries (TIS), facilitates filing returns.
NUDGE, which stands for Non-Intrusive Usage of Data to Guide and Enable Taxpayers, has also been introduced, based on behavioural economics and psychology, which refers to a subtle suggestion or influence or intervention that can change the behaviour of individuals in a predictable way without limiting their freedom of choice.
Accordingly, Section 139(8A) inserted by the Finance Act, 2022 permits taxpayers to file an updated I-T return within 24 months from the end of the relevant assessment year with effect from April 1, 2022.