From whom govt collects more tax citizens or companies?:Income tax collection growth rate lags behind corporate tax

Over the last five years, the Government of India has seen a massive transformation in how it collects taxes. Direct taxes—money paid directly by individuals and companies—have grown faster than indirect taxes like GST and excise duty. According to data from the Ministry of Finance and a fiscal analysis by Madhavi Arora and Harshal Patel of financial services firm Emkay Global, the Central Government is using this steady stream of income to fund large infrastructure projects while keeping daily costs under control. Corporate Tax: Doubling Collection Base 5-Year Trend: Official Ministry of Finance releases show that gross corporate tax collections have more than doubled over the past five years. Lower tax rates (down to 22% for existing companies and 15% for new manufacturing units) encouraged better compliance and higher business profitability. Corporate tax revenue grew from around ₹4.57 lakh crore during the pandemic-impacted FY21 to ₹11.32 lakh crore gross (₹9.11 lakh crore net) in FY24, with more than 58% of collections coming through the simplified tax regime. Current Growth: According to Emkay Global economists Madhavi Arora and Harshal Patel, gross corporate tax collection grew by 15% year-on-year, led in part by a favorable comparison base from the previous year. Personal Income Tax: Steady Growth from Salaried Taxpayers 5-Year Trend: Personal income tax (PIT) collections grew rapidly over the five-year trajectory, eventually outpacing corporate tax collections in annual growth rates. Ministry of Finance data indicates that two-thirds of individual taxpayers transitioned to the new, simplified tax regime. Net personal income tax collections expanded from ₹4.88 lakh crore in FY21 to over ₹10.44 lakh crore in FY24, supported by higher formal employment and digital tax deduction (TDS) systems. Current Growth: Emkay Global notes that personal income tax collections remain very stable, expanding by 12% year-on-year. Goods and Services Tax (GST): The Main Indirect Tax Engine 5-Year Trend: Goods and Services Tax (GST) has been the biggest contributor to India’s indirect tax growth. According to Ministry of Finance reports, the active GST taxpayer base doubled from 70 lakh to over 1.4 crore over five years. Average monthly GST collections rose from under ₹1 lakh crore in FY21 to consistently exceeding ₹1.6 lakh crore to ₹1.8 lakh crore in recent fiscal years, driven by electronic invoicing, stricter checkpost enforcement, and rising domestic consumption. Current Growth: While GST remains the structural core of indirect revenue, recent tax rate rationalizations across consumer goods have stabilized overall growth rates. Excise Duty: A Downward Shift After Fuel Tax Cuts 5-Year Trend: Unlike direct taxes and GST, central excise duty collections followed a downward trajectory over the five-year period. During FY21 and FY22, excise collections peaked due to higher emergency duties placed on petrol and diesel. However, the Ministry of Finance sequentially cut central excise duties on petrol and diesel in mid-2022 and subsequent years to lower transport costs and shield consumers from high global crude oil prices. Current Growth: These duty cuts reduced total excise collections compared to their peak years, intentionally trading off central duty revenue to keep domestic inflation under control. Total Indirect Taxes and Customs Duty 5-Year Trend: Overall indirect taxes (comprising GST, Customs Duty, and Excise Duty) expanded steadily post-pandemic due to economic recovery, though their share relative to direct taxes declined over time. Current Growth: Emkay Global highlights that overall indirect tax collections dipped slightly by -3% year-on-year. This decline was caused by earlier tax cuts on fuel and GST rate reductions. The Customs Outlier: Customs duty was a major exception, jumping by 36% year-on-year. Madhavi Arora and Harshal Patel point out that this spike was driven by an 18% increase in overall imports and higher import duties placed on precious metals like gold and silver. Current Tax Collections Source: Emkay Global Where Is the Money Going? Central and State Spending Trends Beyond tax collections, Emkay Global’s research outlines how both the Central and State governments are managing their budgets: Central Government Focus Capital Expenditure (Capex): Long-term asset creation grew by 18% year-on-year, driven primarily by heavy investment in Defence and Railways. Loans to States: The Centre continues to provide long-term loans to state governments to help them build infrastructure. Fiscal Deficit Target: The Centre reached 42% of its full-year fiscal deficit target in the first five months (5MFY27). This figure looked temporarily higher because the Centre sent an extra tax devolution payment to states in August, which temporarily made net central tax collections negative for that single month. Full-Year Target: Emkay Global expects the Centre to meet its fiscal deficit target of 4.3% of GDP. Potential Economic Risks Economists Madhavi Arora and Harshal Patel note that while the fiscal outlook is stable, two potential risks remain: Middle East Conflicts Oil Prices: If global tensions keep Brent crude oil above $100 per barrel during the second half of the fiscal year, higher energy costs could add an upside risk of 0.2% of GDP to the fiscal deficit. Lower Nominal GDP: If economic growth in nominal terms comes in lower than budgeted, tax collections could slow slightly down the line.