• UGI USER
  • Feb 08, 2024
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INDIA’S TAX-TO-GDP RATIO PROJECTIONS

Why in the News?

  • The Revenue Secretary forecasts India’s tax-to-GDP ratio to reach a historic high of 11.7% in the fiscal year 2024-25.
  • Comparing with global trends, the Secretary emphasizes that as economies develop, tax-to-GDP ratios tend to rise, indicating India’s ongoing fiscal improvement efforts.
 Source: Medium

Corporate Tax Insights:

  • A significant portion of corporate tax filings, about 57%, now occurs at the reduced rate of 22%, introduced in 2019.
  • The deadline for new manufacturing units to benefit from a 15% corporate tax rate concluded in March 2023, with upcoming tax returns expected to reveal the overall uptake.
Key Terms

Tax-to-GDP Ratio:

·    It assesses government control over a nation’s economic resources.

·    Comparing tax revenue to GDP, it gauges the extent of taxation within an economy.

·    Significance of Ratio:

o    A higher ratio signifies a stronger financial standing for the country.

o    It reflects the government’s capacity to finance its expenses effectively.

·    Implications of Higher Ratio:

o    A greater ratio implies the government can collect more revenue without excessive borrowing.

o    It showcases the government’s reduced dependence on loans for funding.