Tax collection predicted to rise 3 times to Rs 19 lakh crore in Modi govt’s 10 yrs

Tax collections for personal income and corporate tax are likely to rise to over Rs 19 lakh crore in the ten years of Prime Minister Narendra Modi’s government.

The development will likely provide more leeway for the government to come out with people-friendly tax measures, as per PTI.

Net direct tax collections after adjusting for refunds increased from Rs 6.38 lakh crore in FY 2013-14 to Rs 16.61 lakh crore in FY 2022-23 on the back of the increasing income of individuals.

The collections from net direct taxes in the current financial year have grown by 20 per cent and are on track to touch Rs 19 lakh crore in the fiscal ending on March 31, 2024.

The projected amount will exceed the estimate of Rs 18.23 lakh crore in the Budget for 2023-24.

The government has been trying to make the tax regime simpler over the years, 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.

The new income tax regime for individuals was made more attractive in the 2023-24 Budget 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.

The government's proposal during the year, however, will include credit card spending in foreign currency under RBI's Liberalised Remittance Scheme's (LRS) annual limit of $2.50 lakh per person.

The proposal faced a strong backlash, as the move to bring foreign credit card spending under LRS would have also meant that Tax Collected at Source (TCS) would require a deduction at the time of making payments.

Banks also conveyed that there would be compliance issues while deducting the TCS.

Subsequently, the government had to delay implementing the proposal.

The number of ITRs filed by individual taxpayers increased from Rs 3.36 crore in 2013-14 to Rs 6.37 crore in 2021-22, registering an overall increase of 90 per cent.

This indicates the widening of the tax base, as a result of several reform measures put in place by the Income Tax Department.
In 2023-24, 7.41 crore returns were filed till October 26, 2023, including 53 lakh returns by first-time filers.

On February 1, the government will present a vote on the account or interim budget as the general elections are due in April-May next year. 
The full Budget is likely to be presented in July 2024 after the elections. The Prime Minister Narendra Modi-led government came to power in 2014.

The digitalisation of the tax administrations and continued focus on the formalisation of the economy have contributed to higher tax compliance rates, according to Gouri Puri of Shardul Amarchand Mangaldas & Co.

"This should give the government some headroom to rationalise tax rates. Certainty around tax treaty application will be key to ensuring ease of doing business in India. The expectation for 2024 would be for the government to continue to streamline direct tax provisions to enhance tax certainty," Puri, a partner at the firm, added.

Deloitte India Partner (Direct Tax) Rohinton Sidhwa said the full Budget is likely to focus on initiatives to tap the China+1 strategy for investment.

With direct tax collections growing at about 20 per cent so far in the current April to March fiscal and the GST mop-up scaling a new peak every year, the trend is expected to continue in 2024 on the back of strong economic performance.

The monthly Goods and Services Tax (GST) collection has touched a high of Rs 1.87 lakh crore in April 2023. 
The average gross monthly GST collection in 2023-24 stands at Rs 1.66 lakh crore and is 11 per cent more than that in the same period in the previous financial year.

The key takeaway from the meetings of the GST Council, comprising finance ministers of Centre and states, this year is the clarification on the levy of 28 per cent tax on online gaming.

INDUSLAW Partner (Indirect Tax) Shashi Mathews said the levy of the highest rate of tax has paused the "meteoric rise" of the online gaming industry".

"It may be expected that the government will have a re-look at some of these pain points. Some of these issues have also been pending before the courts and one might expect some respite in the form of judgments by the courts. Overall, it will be beneficial for the stakeholders to have a closure on these issues in 2024," Mathews said.