Personal income tax collections have surpassed corporate taxes for the first time in India’s history. According to a report by JM Financial Institutional Securities, this is because of formalisation, digitisation and stronger compliance mechanisms.
Personal Tax Share up
The share of personal income tax in total direct taxes has gone up sharply from 38.1% in FY14 to 53.4% in FY24. Corporate tax collections have come down from 61.9% to 46.6% over the same period.
India’s direct tax compliance has undergone a huge change in the last decade. Number of individual income tax return filers has gone up 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 has nearly doubled from 53.8 million to 99.2 million.
Compliance Strengthened by Digitisation
This growth has been driven by robust upfront compliance. Tax Deducted at Source (TDS) collections have more than doubled from ₹2.5 trillion in FY14 to ₹6.5 trillion in FY24, while advance tax payments have nearly quadrupled from ₹2.9 trillion to ₹12.8 trillion. Together TDS and advance tax now account for more than 50% of total direct taxes.
Roll out of Goods and Services Tax (GST) in 2017 has also played a big role in strengthening direct tax compliance. Invoice-matching and data integration under GST has helped widen the tax base. Number of active GST taxpayers has gone up from 12.4 million in 2019 to 14.7 million in 2024, bringing many previously unregistered businesses into the formal system. The digital trail has enabled tax authorities to cross-verify income declarations and curb evasion.
Rising Salaries Fuel Growth
Personal income tax collections have also benefited from steadily rising declared salaries. Salaries reported have gone up from ₹9.8 trillion in FY14 to ₹35.2 trillion in FY23, a 15% CAGR. Over the same period, personal tax collections have gone up from ₹2.4 trillion to ₹8.3 trillion. The report also mentions that India’s direct tax to GDP ratio has gone up from 3.2% in FY01 to 6.6% in FY24. But the tax net is still very narrow, only 6.9% of India’s population pays income tax, much lower than nearly 50% in developed countries.
