India's direct tax collection in FY25 exceeds targets, shows robust growth | cliQ Latest

India’s direct tax collections in the fiscal year 2025 have surpassed the government’s target, reaching ₹22.26 trillion, slightly above the revised estimate of ₹22.37 trillion. This marks a notable achievement despite a marginal dip in collections from “other taxes,” while corporate and non-corporate tax collections were in line with expectations. Officials clarified that these figures are provisional, with adjustments and final reconciliations still in progress, suggesting further growth in the final tally.

Steady Growth in Gross Tax Collections and Refunds

Gross direct tax collections before refunds stood at ₹27.03 trillion, reflecting a robust 15.59 percent growth over the previous year. The government’s commitment to efficient tax administration is evident in the significant increase in refunds, which rose by 26.04 percent to ₹4.77 trillion. This is the highest refund amount ever issued by the tax department, surpassing last year’s ₹3.78 trillion.

Corporate and Non-Corporate Tax Performance

Breaking down the direct tax collections, non-corporate tax, which includes taxes from individuals, firms, and local authorities, grew by 17 percent, amounting to ₹11.8 trillion. On the other hand, corporate tax collections saw a more modest increase of 8.3 percent, reaching ₹9.87 trillion. Securities transaction tax (STT) saw the most significant surge, growing by 55.87 percent to ₹53,296 crore, reflecting a booming market environment.

Despite the slower growth in corporate tax, the overall corporate tax collection saw a 12.41 percent rise to ₹12.72 trillion. This growth in both corporate and non-corporate taxes signals a positive trend in tax compliance across different sectors of the economy.

Tax Buoyancy and Compliance Improvement

The tax buoyancy factor, which indicates the relationship between direct tax collections and GDP growth, stood at a healthy 1.57 in FY25, a slight increase from 1.54 in FY24. This higher buoyancy suggests improved tax compliance and administration. Samir Kanabar, a partner at EY, remarked that the increase in non-corporate tax collections over corporate taxes points to better tax compliance overall.

The record high tax refunds of ₹4.76 trillion raise questions about whether this is due to higher Tax Deducted at Source (TDS). If this is the case, it may be time to revisit TDS provisions to ensure that the system remains efficient and aligned with current tax practices.

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