The Time Series statistics, covering various aspects such as personal income tax collection, corporate tax collection, and the total number of taxpayers, have been released by the Central Board of Direct Taxes ( CBDT ). These comprehensive reports are accessible on the official income tax website. The publication of these reports aligns with the preparations for the Interim Budget 2024 presentation, slated for February 1, 2024.
What is Personal Income Tax and Corporate Tax ?
Personal Income Tax is a tax imposed on the income earned by individuals. It is applicable to a person’s total income, which may include earnings from employment, business profits, rental income, dividends, and other sources. Generally, individuals must file an annual income tax return, wherein they report their entire income and assert any applicable deductions or exemptions.
Corporate Tax is a tax levied on the profits earned by corporations or businesses. It is calculated based on the company’s net income, which is the total revenue minus allowable expenses. The rates may be either flat or graduated, depending on the country’s tax system. Some countries impose a fixed rate on corporate profits, while others may have a progressive system.
According to the data, the Personal Income tax collection has surpassed the Corporate Tax by 0.45% in Finance Year 2022-23. The personal income tax includes collections of Security Transaction Tax also. The reports showed that the income tax collection of the F.Y. 2022-23 is Rs. 8,33,307 ( in Crores ) and the corporate tax collection of the same F.Y. is Rs. 8,25,834 ( in Crores ). The income tax takes a lead with Rs. 7,473 crores.
WHY?
The likelihood of experiencing an uptick in income tax collection, potentially surpassing corporate tax, may stem from an expansion in the number of income taxpayers. And, also the fluctuations in the job market and changes in employment patterns can impact personal income tax collections.
In periods of economic growth with increased employment, there may be a boost in personal income tax revenue, especially if a significant portion of the population is employed in roles subject to income taxation. However, there is a group of people who still say there is heavy unemployment. The total number of ITRs filed in FY 2022-23 stands at 7.78 crore showing an increase of 104.91% as compared to total number of ITRs of 3.80 crore filed in FY 2013-14.
Additionally, another contributing factor could be the incentives and deductions extended to companies by the government. The deductions provided by the government may contribute to a decrease in the effective corporate tax rates, possibly leading to lower overall collections in contrast to personal income tax. They often use Corporate Tax policies to attract investment, spur economic growth, and encourage job creation. This may involve providing tax incentives for certain industries, regions, or types of investments. Thus, it may be attributed to the hike in personal tax collections.
In addition, the rise in personal income tax collection is the rise of entrepreneurial ventures and self-employment. Individuals engaged in business activities may be taxed through the personal income tax system, particularly in jurisdictions where pass-through entities are prevalent.
Furthermore, it can be due to the global economic trends, such as the dominance of service-oriented industries and the digital economy, which can influence the distribution of tax revenue. Personal income from various sources, including investments and self-employment, may become more significant contributors compared to traditional corporate income.
Another notable factor which aids for this hike can be the stringent enforcement of personal income tax regulations and enhanced compliance measures can lead to higher collections. Effective enforcement efforts may capture a broader range of taxable income from individuals. The government has also worked on the income tax portal by updating them for timely and easy filing. Also, the CBDT has given proper messages and direction from time to time regarding the filing of ITRs. However, there are many tax filers who couldn’t file the ITRs on time due to the due date nearing, income tax portal glitches, last minute availability of forms by the CBDT officials..etc.
Compared to the previous F.Ys, last year witnessed a massive growth in the collection of direct taxes. When you analyse the date, you can see a steady growth in both income tax and corporate tax collections. In the F.Y. 2000-01, income tax collection amounted to Rs. 31,764 Crores, a figure that has since escalated to Rs. 8,33,307 Crores in 2022-23. Similarly, corporate tax collection, which stood at Rs. 35,696 during the same period, has now reached Rs. 8,25,834 Crores, showcasing significant growth over 23 years.
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