New Delhi. In the last financial year 2019-20, real Gross Direct Tax collection was down 4.92% to Rs 12.33 lakh crore. In the previous financial year, it clocked at Rs 12.97 lakh crore. The Central Board of Direct Taxes (CBDT) said on Sunday that the chief reason for the reduction in real Gross Direct Tax collection is because of the reduction in corporate tax rates and increase in the limit of the standard deduction and Personal Income Tax Exemption.
Gross recovery could Increase by 8% on Old Tax Rates
The CBDT said that if personal income tax and corporate income tax were collected from the old rates, the gross Direct Tax collection during 2019-20 could have increased by 8 to Rs 14.01 lakh crore. The Gross Direct tax collection was Rs 12,97,674 crore in FY 2018-19. Net direct tax collection in 2019-20 was lower than in 2018-19. But it was anticipated. The reason for this is that during 2019-20 there were historical tax reforms and more refunds were issued.
Tax collection was reduced by Rs 23,200 Crore even after raising the Standard Deduction to Rs 50,000.
The actual Corporate Tax Collection stood at Rs 6.78 lakh crore and personal income tax collection was Rs 5.55 lakh crore in FY 2019-20. Thus the actual direct tax collection for 2019-20 stood at Rs 12,33,720 crore. The CBDT said that the reduction in corporate tax rate during the financial year reduced tax collection by Rs 1.45 lakh crore. On the other hand, raising the personal income tax limit to Rs five lakh and raising the standard deduction limit to Rs 50,000 also reduced tax collection by Rs 23,200 crore. If this had not happened, Corporate Tax Collection would have been Rs 8.23 lakh crore and personal tax collection Rs 5.78 lakh crore in 2019-20. Thus, the Gross Direct Tax collection would have been Rs 14.01 lakh crore, which would have been 8.03% higher than in 2018-19. The nominal GDP growth rate was 7.20 percent in 2019-20.
Recovery has also reduced due to Issuing more Refunds.
The Income Tax Department released tax refunds worth Rs 1.84 lakh crore in 2019-20. This is 14% higher than the Rs 1.61 lakh crore in 2018-19. It is noteworthy that the Government in September last year had reduced the tax rate for all domestic companies not using any tax exemption to 22 percent. Such companies were also exempted from payment of Minimum Alternative Tax (MAT).
The Tax Rate for New Domestic Manufacturing companies has been reduced to 15%
The tax rate was reduced to 15% for new Domestic Manufacturing Companies not availing any special tax exemption. They were also exempted from the payment of MAT. For companies taking advantage of rebates and deductions and paying tax under MAT, the MAT rate was also reduced from 18.5% to 15%.
Individual Income taxpayers have a 100% Tax Exemption on Income up to 5 lakhs.
The government also gave full relief from tax payments to Individual Taxpayers, who are taxable up to Rs 5 lakh. Such taxpayers were given a 100% tax rebate. Along with this, the standard deduction limit was increased from Rs 40,000 to Rs 50,000 to provide relief to the salaried taxpayers.