Significant Rise in India's Direct Tax Collections for FY25
Strong Growth in Direct Tax Collections
New Delhi, Aug 4: The direct tax collections in India have shown impressive growth in FY25, reaching Rs 22,26,375 crore, marking a year-on-year increase of 13.48%. This surge is attributed to the overall rise in collections following the reduction of corporate tax rates starting from the Assessment Year (AY) 2020-21, as reported to Parliament on Monday.
Minister of State for Finance, Pankaj Chaudhary, informed the Lok Sabha that since FY 2021-22, there has been a consistent upward trend in net direct tax collections.
The total revenue impact due to tax benefits provided to corporations was Rs 88,109.27 crore for FY 2022-23 and is projected to be Rs 98,999.57 crore for FY 2023-24.
"These tax incentives have enhanced corporate competitiveness and stimulated investment, thereby fostering economic growth," the minister stated.
To support startups, measures implemented have led to a rise in the number of startups availing deductions under Section 80IAC of the Income Tax Act, increasing from 328 in AY 2022-23 to 877 in AY 2024-25.
Additionally, the number of companies benefiting from Section 80JJAA for hiring new employees has grown from 2,838 in AY 2022-23 to 3,644 in AY 2024-25, according to Chaudhary.
"Specific incentives are outlined in the Income Tax Act via the Finance Bill. These initiatives have resulted in job creation, increased tax revenue, and overall economic advancement," he added.
To foster a competitive business landscape for domestic firms, attract new investments, and generate job opportunities, sections 115BAA and 115BAB were introduced in the Income Tax Act through the Taxation Laws (Amendment) Act, 2019.
The effects of Section 115BAB are evident in the remarkable growth of new manufacturing firms, which rose from 2,928 in AY 2022-23 to 7,185 in AY 2024-25, as noted by the minister.
India's total gross direct tax collections (before refunds) have more than doubled over the past five years, showcasing robust economic growth and enhanced tax compliance, bolstered by the adoption of new digital technologies.