India Collects ₹19.6 in Tax for Every ₹100 Earned, Says Bank of Baroda
New Delhi: India currently collects about ₹19.6 in taxes for every ₹100 earned by the economy, according to a new report by Bank of Baroda. This measure, known as the tax-to-GDP ratio, reflects how much revenue the government raises compared to the country’s total economic output.
The report puts India’s combined tax-to-GDP ratio, including both central and state taxes, at 19.6%. At the central government level alone, tax collections stand at 11.7% of GDP.
While India’s overall tax collection is higher than that of several emerging economies such as Hong Kong, Malaysia, and Indonesia, it remains well below advanced nations like Germany at 38% and the United States at 25.6%. According to the report, this gap highlights the scope for India to expand its tax base as incomes rise and more economic activity moves into the formal system.
Bank of Baroda notes that tax collections are now growing more steadily alongside the economy. Since FY2014, tax revenue has increasingly moved in line with nominal GDP growth, with this trend becoming stronger from FY2023 onwards. The current tax elasticity of 1.1 indicates that tax revenues are rising slightly faster than economic growth.
The report also finds that higher corporate profits and rising personal incomes are supporting income and corporate tax collections. However, it cautions that long-term revenue growth will depend more on structural tax reforms than on economic growth alone.
The upcoming Income Tax Act, 2025, scheduled to take effect from April 1, 2026, is expected to improve compliance and bring more informal economic activity into the tax system.
