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Bengaluru: Karnataka has pipped Delhi to be the second largest contributor to direct tax collection kitty, as per a research report tabled by State Bank of India on Friday
In fiscal year 2023-24, Karnataka contributed 11.9 per cent of direct tax revenue, the second highest after Maharashtra at 38.9 per cent. Delhi was at third spot (10.4 per cent), followed by Tamil Nadu (6.5 per cent) and Gujarat (4.8 per cent).
These five states contribute more than 70 per cent of the Centre’s total direct tax kitty.
This is the first time in at least seven years that Karnataka has contributed more in income and corporate taxes than Delhi, which had held the second spot from 2017-18 to 2022-23, as per the report by SBI Research.
The report stated that the Centre’s tax simplification measures have boosted collections, as contribution of direct taxes to total tax revenue was the highest in 14 years in 2023-24.
“India’s progressive tax regime has increased direct tax contributions to 56.7 per cent of total tax revenue in 2023-24, the highest in 14 years. Since FY2020-21, personal income tax collections have outpaced corporate income tax, growing by 6 per cent compared to 3per cent for corporate tax,” the report said.
“Notably, income disparity for earners up to Rs 5 lakh has decreased by 74.2 per cent, demonstrating that government initiatives are effectively raising incomes among lower-income groups,” it said.
Direct taxes comprise of income and corporate tax, while indirect taxes include GST, customs and duties, among others.
The SBI report stated that the number of tax returns filed continues to increase. ITRs filed for 2023-24 rose to 8.6 crore from 7.3 crore in 2021-22, and could exceed 9 crore for the current financial year.
As per the report, the tax data also dispels the narrative of income inequality.
“Income inequality is declining, with 43.6 per cent of tax filers earning under Rs 4 lakh in 2014-15 moving to higher income groups. Specifically, 15.1 per cent shifted to the Rs 4-5 lakh bracket, 18.7 per cent to Rs 5-10 lakh, 6.7 per cent to Rs 10-20 lakh, and 5.8 per cent to Rs 20-50 lakh, while 1.8 per cent reached the Rs 50 lakh-1 crore group,” it said.
The report also proposed that the TDS threshold on bank interest payments be raised to Rs 1 lakh from Rs 10,000, addressing the outdated limit and the compliance burden on taxpayers.
It said there should be a flat tax rate for individuals earning over Rs 8 lakhs, specifically targeting those aged 60 to 80, with additional provisions for individuals aged 80 and above.
“Prioritising the review of the Income Tax Act in Budget 2026, introduced as a money bill, could enable swift passage within seventy-five days. This approach would allow timely, comprehensive tax reforms, with all direct tax proposals consolidated in a new Code, eliminating amendments to the Income Tax Act, 1961, and fostering a streamlined taxation framework aligned with economic growth and inclusivity,” it said.