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The Ministry of Finance may project gross tax collections of ₹38.3 lakh crore for 2024–2025; net tax collections are projected to grow to ₹26.6 lakh crore. The forecasts of gross and net tax collection for the upcoming fiscal year exceed the 2023–24 Budget figures by around 14%, coming in at ₹33.61 lakh crore and ₹23.31 lakh crore, respectively. Transfers to states are subtracted from gross tax collections to arrive at net tax collections.
"In 2024-25, we expect gross tax revenues to grow faster at 12.2% to around ₹38 lakh crore driven by strong growth in corporate, income tax, and GST collections," Rahul Bajoria, Managing Director and Head of EM Asia (ex-China) Economics at Barclays said.
Bajoria, like almost all other economists, sees the government's tax collections in 2023-24 exceeding the budget projects by a handy margin. Gross tax collections may exceed the budget estimate by around ₹65,000 crore. Meanwhile, net tax collections may be nearly ₹60,000 crore higher than previously thought.
"2023-24 tax revenue continued to imitate the non-linear relationship between economic activity and taxes, significantly outdoing nominal GDP growth," noted economists Madhavi Arora and Harshal Patel of Emkay Global Financial Services. According to them, increasing formalisation, better compliance, enhancing growth momentum, healthy corporate profitability, and "stealth benefits of GST-led formalisation" have driven the rise in direct tax collections this year.
Tax collections this year have indeed been impressive, with the available numbers, so far, suggesting a tax buoyancy of 1.7 – far higher than the average of 1.2 across the five pre-pandemic years from 2014-15 to 2018-19. Tax buoyancy is the ratio of growth in tax collections to nominal GDP. As such, the buoyancy is said to be greater than 1 when tax collections grow faster than nominal GDP.
However, economists see the tax buoyancy declining in 2024-25. According to India Ratings and Research, the net tax revenue buoyancy, or the ratio of growth in net tax revenue to nominal GDP, maybe 1.2 in 2024-25, down from their forecast of 1.9 for 2023-24.
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