Budget 2024 gunning for 10.5% rise in direct tax collections
The Union Budget 2024 aims for a 10.5% increase in direct tax collections, despite a sluggish global economy and a high revenue base in the current fiscal year, Moneycontrol has reported. Senior government officials anticipate a 17-18% growth in direct tax collections this financial year. This is thanks to factors like the expansion of the tax base under GST, the sharing of data with other departments, and enhanced data intelligence.
Direct tax collections reach Rs. 9.57 lakh crore
As of October 9, net direct tax collections for FY23-24 reached Rs. 9.57 lakh crore. A senior government official informed Moneycontrol that a 10.5% growth in direct taxes for FY24-25 is achievable, with buoyancy likely to stay above one next year. Buoyancy refers to the proportional increase in tax revenues as national income rises. With a 10.5% growth, the net direct tax collection is projected at Rs. 18.2 lakh crore in 2023-24.
Factors contributing to direct tax growth
Several factors might contribute to a double-digit rise in direct taxes next year, including the China+1 strategy, a stable government, and strong economic factors. The formal economy is growing, GST collection is rising, domestic demand remains high, and small businesses are experiencing higher turnover due to formalization under GST. Auto-populated tax returns using artificial intelligence (AI) and big data have also played a role in the surge in direct tax collection.
Supreme Court rulings impact additional revenues
The Income Tax department should receive extra revenue following Supreme Court rulings on Double Taxation Avoidance Agreements (DTAA) and telcos' Adjusted Gross Revenue (AGR) interpretation. The court decided that multinational companies cannot use DTAA benefits unless Indian tax authorities approve them. This will result in many MNCs paying additional income tax in 2023-24. Furthermore, the court ruled that the license fee paid by telcos as a percentage of their profit will be considered capital expenditure, increasing their taxable income.
