Another feather in Modi government’s cap: Income tax collections exceed corporation tax for first time in 21 years | Personal finance news

New Delhi: The Center released its accounts for the 2020-21 financial year earlier this week. Of all the significant aspects of the report, the data shows that personal tax collection was higher than corporate tax collection for the year after 21.

The income tax collection for FY21 was 4.69 trillion rupees, while the corporate tax collection was 4.57 trillion rupees. The calculation indicates that the income tax collection was Rs 12,000 more than the corporate tax collection.

Prior to FY21, income tax collection exceeded corporation tax 21 years earlier in FY2000-01. At that time, the total direct tax collection was Rs 68,305 crore. Of this amount, corporate tax collection was Rs 35,696 crore, personal income tax collection was Rs 31,764 crore and other tax collection was Rs 31,764 crore .

For the uninitiated, earning individuals pay income tax based on their wages, while companies pay corporation tax on the profits they have earned in the respective financial year.

Why did income tax cross corporation tax in FY21?

The main reason that many would have thought behind this change could be the pandemic-induced economic downturn due to which many companies suffered heavy losses or ended the financial year with less profit.

Less profit means less tax and therefore corporations pay less tax. However, that is not the case, at least for FY21. Official data suggests that after-tax profit of listed companies for FY21 jumped to 2.6% of gross domestic product.

The performance of listed Indian companies is apparently the best since fiscal 2015, when their profit was 3.1% of gross domestic product, according to a report by Livemint.

Therefore, it is quite surprising that income tax receipts have jumped over corporate tax receipts at a time when many have also lost their jobs.

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