Impact of Direct Tax Reforms on Tax Revenue in India

Abstract

Purpose: The study carries out a critical analysis of tax reforms on tax collection in India. Specific focus is made on direct tax collection from reforms made in the area of direct taxes. Trend analysis of direct tax collection, the impact of direct tax collection due to the reforms on GDP has been examined. Further, a study has also been carried to know the impact of various economic factors on direct tax collection in India. A forecast model has been used to forecast the direct tax collection for a future period of ten years. newlineMethodology: For the purpose of the study, direct tax collection in India for a period of 13 years commencing from A.Y. 2006-07 to A.Y. 2018-19 has been taken into consideration. The study is based upon secondary data which have been collected from the Department of Revenue, Ministry of Finance; Reserve Bank of India and Comptroller Auditor General of India report. Information from journals and other websites has also been considered. For analysis of data and testing of hypothesis trend analysis, correlation and regression analysis and t-test have been applied. newlineFindings: The study reveals that the direct tax reforms have led to change in tax base and tax rates. Surcharge and Cess rates have also been changed during the study period. Scheme of taxation based on Gender and age-wise have been implemented during the study period. The rate of corporate tax has also been decreased. There was a difference between actual direct tax collection and budgeted direct tax collections but this difference was not significant. Direct tax collection has a significant impact on GDP as compared to Indirect tax. It is found that direct tax collection has a significant effect on GDP and while considering the various economic indicators it is evident that trade openness has a significant impact on GDP. newline newline