In an ambitious target set by the Narendra Modi-led government, India is poised to witness a significant surge in direct tax collections, with estimates soaring to over ₹19 lakh crore within a decade.
Recent data reveals a robust growth trajectory in net direct tax collections. Specifically, after adjusting for refunds, these collections escalated from ₹6.38 lakh crore in the fiscal year (FY) 2013-14 to a staggering ₹16.61 lakh crore in FY 2022-23. Encouragingly, the ongoing fiscal year indicates a 20% growth in both personal income tax and corporate tax collections, suggesting a potential collection of around ₹19 lakh crore by the end of FY 2023-24.
Over the years, the government has been proactive in simplifying the tax regime, focusing on lower rates and minimizing exemptions. Notably, initiatives such as reduced tax rates for corporates relinquishing exemptions were introduced in 2019. Following suit, a similar scheme was rolled out for individual taxpayers in April 2020. The recent 2023-24 Budget further enhanced the appeal of the new income tax regime for individuals by rationalizing tax slabs, elevating the basic exemption limit to ₹3 lakh, and introducing a standard deduction of ₹50,000.
However, some proposals faced resistance, like the contentious move to incorporate credit card expenditures in foreign currency under the RBI’s Liberalised Remittance Scheme. Due to challenges in compliance, this proposal was postponed.
Highlighting the positive impact of reforms, the number of individual taxpayers filing returns surged from 3.36 crore in FY 2013-14 to 6.37 crore in FY 2021-22. Impressively, by October 2023, 7.41 crore returns were filed, inclusive of 53 lakh first-time filers.
Looking ahead, the upcoming Budget is anticipated to emphasize strategies aligning with the China+1 approach to fortify investments and innovation. Moreover, preparations for the World Bank B-READY ranking are in the pipeline. The growth momentum, evident from a consistent rise in GST collections, is projected to persist in 2024, underpinned by a robust economic landscape.
On a related note, the GST Council recently clarified its stance on online gaming taxation, imposing a 28% tax on the total amount wagered at the onset of gaming. Furthermore, overseas online gaming entities are mandated to register with GST authorities. Amidst these developments, several online gaming companies are contesting GST evasion allegations, awaiting judicial verdicts.
Experts in the field anticipate a reevaluation of certain tax structures, especially concerning online gaming, fostering a more definitive regulatory environment in 2024.
