INCOME TAX: FIRST TIME in last 21 years! I-T collections overtake corporation tax

The Central Government published its accounts for the financial year 2020-21 early this week. As per the data in the report, the personal tax collection was higher than the corporate tax collection for the year after 21 years.

Income tax collection for FY21 stood at Rs 4.69 trillion, while the corporation tax collections stood at Rs 4.57 trillion. The calculation points out that income tax collection was Rs 12,000 more than corporation tax collections, as per a report by Zee News.

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Before FY21, Income tax collection topped corporation tax 21 years earlier in the financial year 2000-01. At that time, the total direct tax collection was Rs 68,305 crore. Out of this, 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.

Who pays income tax and corporation tax?

Income tax is paid by the individuals who are earning. They pay the tax based on their salaries.

While, on the other hand, corporation tax is paid by the companies on the profit they have made in the respective financial year.

Why income tax collection surpassed corporation tax in FY21?

As per a report by Zee News, the major reason behind the shift could be the pandemic-led economic downturn due to which many companies suffered severe losses or ended up the financial year with fewer profits.

If a company will earn fewer profits this means that they will pay less tax. However, this is not the case at least in FY21. According to official data profit after tax of listed companies for FY21 jumped to 2.6 percent of gross domestic product.

According to a report by Livemint, the performance of the Indian publicly listed companies is the best since FY15 when their profit was 3.1 percent of gross domestic product.