First time in 12 years, income tax collections surpass corporation tax collections

Due to decreased tax rates and the impact of COVID-19 on firms, corporate tax collection dipped below personal income tax collection for the first time in 12 years. For FY21, corporate income tax collection was Rs 4.57 lakh crore, whereas total personal income tax collection was Rs 4.69 lakh crore. Corporate tax is placed on corporations or businesses, whereas personal income tax is assessed on individuals.

According to figures from the Controller General of Accounts, corporate and personal income tax receipts fell by 18% and 2.3%, respectively, in the fiscal year 2020-21. In September 2019, the Modi administration reduced business tax rates by roughly ten percentage points. New corporation tax rates for existing businesses are set at 25%, while rates for new manufacturing businesses are set at 17%.

According to experts, reduced tax rates and a drop in GDP have resulted in fewer corporate tax collection. COVID-19 has a significant impact on India’s economy. In FY21, the fiscal deficit was 9.3 percent of GDP, while GDP fell by 7.3 percent.

According to government figures, the drop in FY21 GDP is the worst in more than 40 years. The economy has exhibited indications of progress in comparison to prior quarters, but the country’s current COVID-19 predicament has led economists to lower their GDP predictions for both Q4 and Q1 of FY22.

While most analysts expected double-digit growth in FY22, although from a lower base, the second wave of the COVID-19 pandemic, as well as state government lockdowns to contain the rise in cases, have resulted in changes to growth predictions. The median projection for the first quarter of 2021-22 by rating agencies and key economists was 21.6 percent, lower than the 23 percent expected before.

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