Syllabus: GS3/ Economy
Context
- India’s net direct tax collections rose 14.64% to over Rs 5.21 lakh crore from April 1 to June 17 of the current financial year (FY 2026-27), according to data released by the Income Tax Department.
Key Highlights of the Data
- Net corporate tax collections increased 22% to Rs 2.08 lakh crore during the period, while net non-corporate tax (NCT) collections, which include taxes paid by individuals, HUFs and firms, rose 8% to about Rs 2.94 lakh crore.
- Collections from Securities Transaction Tax (STT) rose to 45% to Rs 18,856 crore.
- Advance tax collections, seen as a key indicator of business performance, grew 15.30% to more than Rs 1.78 lakh crore.
- Corporate advance tax payments rose 16% to over Rs 1.40 lakh crore, while advance tax collections from non-corporate taxpayers increased 13% to Rs 37,620 crore.
- The government has budgeted direct tax collections of Rs 26.97 lakh crore in FY27, implying a growth of 15% over the Rs 23.40 lakh crore collected in FY26.
Reasons for Rise in Direct Tax Collections
- Corporate Profitability: Higher corporate tax receipts indicate that companies are earning more profits. The fact that companies are paying more in advance tax shows that they are confident about their future earnings.
- Strong financial market activity: STT collections grew rapidly by 45%. Higher trading volumes in equity and derivatives markets have helped in higher tax revenues.
- Enhanced Tax Compliance: Better tax administration through more digitization and data analytics have widened the tax base.
- Economic Growth Beat: The increase in tax revenues has been a consequence of the increase in business activity and income creation. Revenue mobilisation has been supported by growth in the services and manufacturing sectors.
Direct Taxes
- A Direct tax is a kind of charge, which is imposed directly on the taxpayer and paid directly to the government by the persons (juristic or natural) on whom it is imposed.
- A direct tax is one that cannot be shifted by the taxpayer to someone else.
Types of Direct Tax
- Income Tax: Income Tax Act imposes tax on the income of the individuals or Hindu undivided families or firms or co-operative societies (other than companies) and trusts (identified as bodies of individuals associations of persons) or every artificial juridical person.
- All residents are taxable for all their income, including income outside India.
- Non residents are taxable only for the income received in India or Income accrued in India.
- Not ordinarily residents are taxable in relation to income received in India or income accrued in India and income from business or profession controlled from India.
- Corporation Tax: The companies and business organizations in India are taxed on the income from their worldwide transactions.
- A corporation is deemed to be resident in India if it is incorporated in India or if its control and management is situated entirely in India.
- Securities Transaction Tax (STT): STT is a tax being levied on all transactions done on the stock exchanges. STT is applicable on purchase or sale of equity shares, derivatives, equity oriented funds and equity oriented Mutual Funds.
What is Advance Tax?
- Advance tax refers to the payment of income tax in installments during the financial year instead of paying the entire amount at the end of the year.
Source: MOSPI, TOI, TH, BS, Money Control
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