Sustaining 19.5% growth in direct tax mop-up in FY24 may be difficult

Sustaining the current 19.5 per cent growth rate in income and corporate tax collections may be difficult in next fiscal year given headwinds from a slowing world and high base effect, a government source said.

Net direct taxes, which are made up of personal income tax and the tax levied on corporate earnings, have seen a record growth in current fiscal year, topping up the numbers projected in the Budget.

The expected lower nominal GDP growth in 2023-24 on the back of threats of global recession could impact income tax collection, the government source told reporters ahead of the presentation of Union Budget 2023-24 on February 1.

The net direct tax collection grew 19.55 per cent to Rs 12.31 lakh crore till January 10.

This is 86.68 per cent of the Budget estimates for current fiscal year.

The forthcoming Budget will have revised revenue estimates for current fiscal year as well as tax collection estimates for the next year.

“It would be difficult to maintain current 19.5 per cent growth rate in net direct taxes in 2023-24,” the source said.

As per first advance estimates, India's nominal GDP is projected to grow at 15.4 per cent this fiscal year and after adjusting inflation, real GDP growth is expected to be 7 per cent.

Economists expect real GDP growth to slow down to 6-6.5 per cent next fiscal year and a lower nominal GDP growth on account of declining inflation.