India’s Direct-Tax Buoyancy Stays Above One for Third Straight Year

India’s direct-tax collections continued to outpace nominal economic growth in 2024-25, with tax buoyancy remaining above one for the third consecutive financial year. The measure stood at 1.39, according to government data submitted to a parliamentary panel.

Tax buoyancy compares growth in tax revenue with growth in GDP. A figure above one means tax revenue is rising faster than the economy. Direct-tax buoyancy increased from 1.27 in 2022-23 to 1.48 in 2023-24 before moderating to 1.39 in 2024-25, which the government described as still well above one.

The figures appear in a background note prepared for the Parliamentary Standing Committee on Finance, led by BJP lawmaker Bhartruhari Mahtab. The committee is reviewing reforms to the direct-tax regime and their effects. The government note points to systemic changes, easier compliance and substantial reductions in corporate and personal income-tax rates.

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Still well above one.

In 2019, the government cut the corporate tax rate for domestic manufacturing companies from 30% to 22%, and set a 15% rate for new manufacturing firms to attract investment. The 2025-26 budget exempted individuals earning up to ₹12 lakh from income tax under the new regime. For salaried taxpayers, the effective exemption rose to ₹12.75 lakh after the standard deduction.

The government replaced the Income Tax Act of 1961 with the Income-tax Act, 2025, effective April 1, 2026. The government said the reforms aim to encourage voluntary compliance, reduce administrative burdens and strengthen trust between taxpayers and the government. In its report, the committee said tax-rate rationalization had produced highly positive results, citing an increase in the gross tax-to-GDP ratio from 10% in 2019-20 to an estimated 11.2% in the 2026-27 budget estimates.

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Strategic tax rate rationalization has yielded highly positive results.