New Delhi [India], August 27 : Personal income tax collections have surpassed corporate taxes for the first time in India's history, signalling a structural shift in the country's direct tax architecture driven by formalisation, digitisation and stronger compliance, according to a report by JM Financial Institutional Securities.
The share of personal income tax in total direct taxes rose sharply from 38.1 per cent in FY14 to 53.4 per cent in FY24, while corporate taxes declined from 61.9 per cent to 46.6 per cent over the same period.
India's direct tax compliance has seen major changes over the past decade. The number of individual income tax return filers surged 2.3 times, from 30.5 million in FY14 to 69.7 million in FY23. When including those who pay tax through TDS without filing returns, the taxpayer base nearly doubled from 53.8 million to 99.2 million.
This growth has been underpinned by robust upfront compliance. Tax Deducted at Source (TDS) collections more than doubled from Rs 2.5 trillion in FY14 to Rs 6.5 trillion in FY24, while advance tax payments nearly quadrupled from Rs2.9 trillion to Rs 12.8 trillion. TDS and advance tax payment now account for more than half of total direct taxes.
The introduction of Goods and Services Tax (GST) in 2017 has further strengthened direct tax compliance through invoice-matching and data integration. The number of active GST taxpayers rose from 12.4 million in 2019 to 14.7 million in 2024, formalising many previously unregistered businesses. This digital trail has allowed tax authorities to cross-verify income declarations, curbing tax evasion.
Personal income tax collections have also been buoyed by rising declared salaries, which grew from Rs 9.8 trillion in FY14 to Rs 35.2 trillion in FY23, a 15 per cent CAGR. Over the same period, personal tax collections increased from Rs 2.4 trillion to Rs 8.3 trillion.
Direct tax to GDP ratio improved from 3.2 per cent in FY01 to 6.6 per cent in FY24. However, still only 6.9 per cent of India's population pays income tax compared to nearly 50 per cent in developed economies.
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