India’s Net Direct Tax Collection Jumps as Corporate Tax Cuts Drive Growth

India’s net direct tax collections reached ₹22.26 lakh crore in FY25, registering a 13.48 percent year-on-year increase, the government informed Parliament on Monday. Minister of State for Finance Pankaj Chaudhary attributed the strong growth to the reduction in corporate tax rates implemented from Assessment Year (AY) 2020–21.

Since FY 2021–22, net direct tax collection has shown consistent and robust growth. The tax benefits extended to companies have had a significant fiscal impact, amounting to ₹88,109 crore in FY23 and an estimated ₹98,999 crore in FY24. According to the minister, these incentives have improved corporate competitiveness, attracted investments, and supported overall economic growth.

Efforts to encourage startups have also shown positive results, with the number of startups claiming deductions under Section 80-IAC of the Income Tax Act increasing from 328 in AY 2022–23 to 877 in AY 2024–25. Similarly, companies availing benefits under Section 80-JJAA for employing new workers rose from 2,838 to 3,644 during the same period.

To foster a competitive business environment and stimulate job creation, Sections 115BAA and 115BAB were introduced through the 2019 Taxation Laws (Amendment) Act. As a result, new manufacturing companies have seen substantial growth - from 2,928 in AY 2022–23 to 7,185 in AY 2024–25.

India’s gross direct tax collections, before refunds, have more than doubled in the past five years. This growth reflects not only a strong economy but also improved tax compliance, supported by the government’s push towards digital transformation in tax administration.