India’s direct tax-to-GDP ratio has reached a record high of 6.64% in the fiscal year 2023-24, reflecting a substantial achievement in tax collection over the last decade. According to the Central Board of Direct Taxes (CBDT), direct tax collections have soared by over 182% during this period, exceeding ₹19.60 lakh crore in FY24.
The data indicates that corporate tax collections have more than doubled, rising from ₹4.29 lakh crore in FY15 to over ₹9.11 lakh crore in FY24. Meanwhile, personal income tax collections have nearly quadrupled, increasing from ₹2.66 lakh crore to ₹10.45 lakh crore. This growth can be attributed to improved compliance, an expanding formal economy, and enhanced tax administration, including the use of technology in tax monitoring and processing.
In FY15, direct tax collections totaled ₹6.96 lakh crore, with corporate tax contributing ₹4.29 lakh crore and personal income tax at ₹2.66 lakh crore. The increase in direct tax revenues has closely followed the growth of India’s nominal GDP, which rose by approximately 136% during the same period, thereby improving the direct tax-to-GDP ratio.
 Rise in ITR Filings
The CBDT’s data also shows a significant rise in the number of income tax returns (ITRs) filed, with FY24 recording 8.61 crore ITRs—a 113% increase from the 4.04 crore returns in FY15. This increase reflects greater participation by individuals and businesses in the formal tax system, driven by heightened awareness and stricter enforcement.
The rise in ITR filings is attributed to policy reforms that have broadened the tax base, digitized processes, and enhanced scrutiny through data analytics and third-party reporting. These initiatives have simplified tax compliance and encouraged more taxpayers to file their returns.
 Decrease in Collection Costs
In addition to rising tax collections, the cost of tax collection has dropped to a record low of 0.44% in FY24. This efficiency stems from the increased use of technology in tax administration, including e-filing, automated processing systems, and data analytics for compliance enforcement. The improved administrative efficiency allows the government to allocate more resources to public services, infrastructure, and welfare programs without burdening taxpayers.
 Significance of the Direct Tax-to-GDP Ratio
The direct tax-to-GDP ratio serves as a crucial economic indicator, illustrating how effectively the government collects taxes about the overall economy. A higher ratio indicates better tax administration and compliance, enabling the government to generate more revenue for essential services and investments. Countries with larger formal sectors and efficient tax systems generally exhibit higher tax-to-GDP ratios, reflecting their ability to capture economic activity effectively.
In conclusion, India’s achievement in reaching a direct tax-to-GDP ratio of 6.64% signifies progress in tax collection efficiency and compliance. The continuous growth in direct tax revenues and ITR filings highlights the country’s efforts to enhance its tax system, paving the way for increased public investment and economic development.