Daijiworld Media Network - New Delhi
New Delhi, Jul 25: India’s gross direct tax collections have more than doubled in the past five years, reflecting a combination of strong economic performance and increased taxpayer compliance, enabled largely through wide-scale adoption of digital tools and reforms in the Income Tax ecosystem.
As per data from the Finance Ministry, gross direct tax collections rose from Rs 12.31 lakh crore in FY 2020-21 to Rs 27.02 lakh crore in FY 2024-25. This surge is mirrored by a 36% increase in the number of income tax returns filed, climbing from 6.72 crore to 9.19 crore during the same period.
Officials attributed this growth not only to a recovering and expanding economy but also to deliberate government measures aimed at simplifying tax filing, enhancing transparency, and widening the tax base through technological interventions.
India’s tax infrastructure has undergone a significant transformation in recent years. The Permanent Account Number (PAN) system introduced in 1995 laid the groundwork for unique taxpayer identification. The linking of PAN with Aadhaar in 2017 was aimed at preventing duplication and improving compliance.
Further improvements came with the establishment of the Centralised Processing Centre (CPC) in 2009, which allowed for automated income tax return processing and swift issuance of refunds. In 2012, the launch of TRACES helped resolve issues related to mismatched TDS data.
The rollout of TIN 2.0, a modern payment gateway, provided real-time tax credit updates, multiple payment methods, and faster refund processing, offering taxpayers greater convenience and flexibility. Alongside this, the Demand Facilitation Centre in Mysuru created a centralized system for managing outstanding tax dues.
Leveraging the power of data, the Income Tax Department launched PROJECT INSIGHT, a sophisticated analytics platform that compiles a 360-degree profile of taxpayers using information drawn from various sources. This has enabled the department to detect inconsistencies, improve compliance, and strengthen enforcement.
To reduce human discretion and ensure efficiency, the government introduced the Faceless Assessment Scheme in 2019. By eliminating face-to-face interactions between taxpayers and officers, this system ensures random case allocation, electronic correspondence, and enhanced accountability.
The implementation of the Annual Information Statement (AIS) in November 2021 on the Income Tax portal further simplified tax filing. It provides taxpayers with detailed financial records, including data related to TDS, TCS, mutual funds, and stock market transactions. These insights are also integrated into pre-filled returns using Taxpayer Information Summaries (TIS), making the filing process faster and more accurate.
The department also launched the NUDGE framework, inspired by behavioural economics, which uses personalized prompts to gently encourage taxpayers toward timely compliance without coercion.
In a significant policy move, Section 139(8A) of the Finance Act, 2022, now allows taxpayers to voluntarily file updated income tax returns within a 24-month window after the end of the relevant assessment year. This provides an opportunity for correction and greater transparency without penalties.
The Ministry emphasized that this progress in tax collections and compliance has been made possible by integrating technology with administrative reforms, helping India move closer to a digitally empowered, transparent, and inclusive tax system.