New Delhi, August 27:
In a landmark development for India’s economy, personal income tax collections have for the first time outpaced corporate tax receipts, reflecting a major transformation in the country’s tax system. Analysts attribute this trend to rapid formalisation, stronger digital integration, and improved compliance mechanisms.
According to market research estimates, the share of personal income tax in overall direct taxes has surged beyond 53% in FY24, compared to just 38% a decade earlier. During the same period, corporate tax contributions have dropped to under 47%, marking a clear shift in the burden of direct taxation.
The expansion of the taxpayer base has been a crucial driver. The number of individuals filing returns has grown sharply in the past 10 years—nearly doubling when including those who pay tax through TDS without formally submitting returns. Collections through Tax Deducted at Source (TDS) have jumped more than two-fold in the last decade, while advance tax payments have grown nearly four times, together now forming the bulk of direct tax revenues.
The rollout of the Goods and Services Tax (GST) in 2017 also played a vital role by creating a digital trail, improving invoice-matching systems, and bringing previously unregistered businesses under the formal economy. Active GST registrations have crossed 14 million, providing tax authorities with wider tools to track income and curb evasion.
Rising salaries have further boosted personal tax receipts. Declared incomes have multiplied more than three times in the last decade, mirroring India’s expanding middle class and formal job growth. Direct tax collections as a share of GDP have risen steadily, now touching nearly 6.6% compared to just above 3% in the early 2000s.
Despite this progress, challenges remain. Only about 7% of India’s population currently pays income tax—far lower than in developed nations where nearly half of citizens contribute. Experts say broadening the tax net remains critical for long-term fiscal stability.
The shift, however, is being seen as a structural milestone that could redefine India’s revenue architecture for years to come.
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