Minister of Parliament Shri Bhartuhari Mahtab and Balabhadra Majhi asked the Union Minister of Finance four questions about tax collection after reducing corporate tax rates. They wondered whether lowering corporate tax rates has led to higher tax collections, increased foreign investments, and economic growth.
To answer these questions, Finance Minister Nirmala Sitharaman stated that there has been an overall increase in direct tax collections after reducing the corporate tax rates from AY 2020-21. The minster provided the details of the net direct tax collected in the last five years, and they were:
The Future of Tax and Finance: Upskill with Us
These numbers, given by the FM, show that although specific concerns had initially been raised, the reduction in corporate tax rates did not decrease tax revenue. The FM stated that it created a favourable environment for businesses, which led to higher profits and compliance.
Regarding foreign investment inflows, the FM stated that, according to the data available on the RBI website, they increased from 44,417 million USD in FY2019-20 to 53,105 million USD in FY2023-24.
Regarding the industry-wise details of tax benefits and their impact on economic growth, the FM stated that the government had extended multiple tax incentives to domestic companies under the old tax regime intending to promote sector-wise growth. The FM noted that these benefits have helped industries remain competitive and improved investments. Some notable tax benefits include:
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Tax benefits totalling ₹96,892.39 crore were extended in FY 2021–2022, and this amount increased to ₹1,09,333.38 crore (estimated) in FY 2022–2023. The change has justified its favourable effects on economic growth, competitiveness, and job creation, even though it represents a significant outflow of government incentives.
FM’s response included the broader goal of turning India’s economy into a $5 trillion one. To this end, the government has offered tax breaks to encourage big international companies, including Apple, Google, and Tesla, to establish production facilities in India. One significant change is the passage of Sections 115BAA and 115BAB of the Income Tax Act, which cut tax rates for domestic corporations and recently incorporated manufacturing firms.
The Future of Tax and Finance: Upskill with Us
Nirmala Sitharaman’s statement in the Lok Sabha reaffirmed the government’s dedication to pro-business measures. The evidence is clear: Lower taxes have resulted in more investment, employment, and economic momentum rather than lower revenue. The Finance Minister stated that the current patterns show that India’s corporate tax plan is producing the desired output and bringing it closer to its ambitious economic goals, even though taxation arguments will persist.
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