A marginal dip in net direct tax collections as of July 10, 2024, has stirred debate over the government’s revenue momentum in the current fiscal. But a closer look at decade-long trends sourced from the Income Tax Department suggests that this decline isn’t due to any real slowdown in gross tax inflows — rather, it is a function of a dramatic surge in tax refunds.According to official data shared by the Income Tax Department, refunds issued to taxpayers have grown by a staggering 474% over the past 11 years — rising from ₹83,008 crore in FY 2013–14 to ₹4,76,743 crore in FY 2024–25. In contrast, gross direct tax collections grew by 274% in the same period, from ₹7,21,604 crore to ₹27,02,974 crore.
This sharp rise in refunds, say sources in the know, has led to a temporary softening of net tax figures, despite strong underlying collection performance.
“The dip in net collections is largely statistical. With refunds being issued faster and in greater volumes, net figures are compressed in the early part of the year. But this is a byproduct of a more efficient system,” sources in the know explained.Refund growth outpaces everything elseIncome Tax Department data reveals that the taxpayer base too has expanded significantly during this period. The number of income tax returns (ITRs) filed has increased from 3.8 crore in 2013 to 8.89 crore in 2024, marking a 133% increase. When updated ITRs and unique PAN-linked filings are considered, the number rises to 9.19 crore, pushing the growth figure to 141%.However, it’s the sharp improvement in refund processing that stands out.The average time taken to issue refunds has come down from 93 days in 2013 (as per internal assessments, subject to verification) to just 17 days in 2024 — a dramatic 81% decrease.Sources within the department attribute this improvement to extensive digitisation of tax processes — particularly the adoption of faceless assessments, real-time TDS adjustments, and automated refund processing systems.“The rollout of pre-filled returns, end-to-end e-filing, and tech-driven grievance redressal mechanisms has created a seamless refund cycle. The experience for taxpayers has improved, and compliance is getting rewarded more promptly,” said sources familiar with the department’s technology roadmap.Refunds now a bigger chunk of gross collectionsPerhaps the most telling shift is seen in the ratio of refunds to gross collections. In FY 2013–14, refunds made up 11.5% of total gross direct taxes. In FY 2024–25, that share has risen to 17.6%, according to Income Tax Department figures.Tax officials and policy advisors interpret this trend as a positive reflection of formalisation.“As more taxpayers come into the net and TDS and advance tax mechanisms deepen, overpayment becomes more common. The increase in refunds is not a flaw — it’s a feature of a maturing system,” sources in the know remarked.Data at a glance ( Figures sourced from the Income Tax Department)Refunds issued to taxpayers:FY 2013–14: ₹83,008 croreFY 2024–25: ₹4,76,743 croreGrowth: 474%Gross direct tax collected:
FY 2013–14: ₹7,21,604 croreFY 2024–25: ₹27,02,974 croreGrowth: 274%Income tax returns filed:2013: 3.8 crore2024: 8.89 crore (AY 2024–25)Including updated ITRs and unique PANs: 9.19 croreGrowth: 133%This Denotes ITRs filed for AY 2024-25. However unique PAN, AY wise ITRs filed during FY 2024-25 including updated ITRs, are 9.19 Crores (Growth is 141%), sources in the know said.Average refund issuance time:2013: 93 days2024: 17 daysReduction: 81%Refunds as % of gross direct taxes collected:FY 2013–14: 11.5%FY 2024–25: 17.6%Interpreting the trendsSources point out that the growing volume and share of refunds should not be misread as a sign of inefficiency or revenue leakage. Instead, it reflects a transparent and responsive tax architecture, wherein excess remittances — driven by advance tax and TDS regimes — are being returned promptly to taxpayers.”This is not just a data point — it’s a signal. It shows that the system is working better. Refunds issued quickly mean fewer disputes, happier taxpayers, and more trust in the system,” said sources in the know, engaged in tax administration reforms.A structural shift, not a slowdownWhile the July 10 snapshot may show a dip in net direct tax numbers, the broader trajectory tells a different story — of deeper compliance, faster processing, and a maturing tax ecosystem. With refund volumes rising and turnaround times shrinking, India’s direct tax regime appears to be evolving towards greater efficiency and taxpayer facilitation — even if it temporarily reflects lower net collection figures on the surface.Also Read: Silent Epidemic: Excess salt intake puts millions at risk in India, says ICMR NIE
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