Karnataka third highest direct tax contributor

Karnataka, which accounts for 10.11% of the total direct tax collections, has emerged the third highest tax contributor in the country.

Direct tax collections from Karnataka during 2016-17 witnessed a whopping rise of 19.27% at Rs  85,920.98 crore compared with the previous year. In the year 2015-16, the state had contributed Rs  72,040.94 crore to the direct tax kitty. If the contribution of the union territories is removed, the share of the state jumps up to  10.38% in the tax collections, according to data available with the Income Tax Department.

Between 2013-14 and 2016-17 the tax collection from the state has almost doubled.  

Maharashtra and Delhi are in the top two positions. While Maharashtra contributed Rs  3,14,056.27  crore  (36.96%) to the direct tax pie, Delhi contributed Rs  1,08,882.5 crore (12.81%), a tad ahead of Karnataka. Other states in the top five tax contributors are Tamil Nadu at Rs  60,077.95 crore (7.07%) and Gujarat with Rs  38,808.27 crore (4.57%).

However, it is pertinent to note that none of the states in the top five have shown as much growth in tax collections as the country's IT and startup hub has shown. Maharashtra's direct tax collections have grown by  9.43%  compared with the preceding year, while Delhi has shown a growth of 7.10%, Tamil Nadu's collections have grown by 18.91% and Gujarat's by  14.26%.

Experts attribute the high growth of collection to the nature of Karnataka's economy. "Karnataka is a software driven economy, while Maharashtra is a manufacturing-driven economy. Software sector has not been impacted by recent policy changes, so its direct tax revenue is growing," Mohan Lavi, Bengaluru-based tax expert said.

He also attributed it to the startup culture of Bengaluru and increased immigrants in to the city.

Also, the growth in tax revenue has not been commensurate with the cost of collecting it. While the direct tax collection grew by  14.57%, the cost of collecting it has gone up by  21.45%, from Rs  4,593 crore in 2015-16 to Rs  5,578 in 2016-17.

Out of the total effective assesses of  6.27 crore, a whopping 5.93 crore (94.55%) were individual assesses.

On the segmentation front, while the corporates contributes Rs 4,84,924 crore (57.06%) of the total direct tax collected, individuals contributed Rs  349270 crore (41.10%) to the tax kitty nationally.

The direct tax collection across the country, however has been lesser than indirect tax collection. While total direct tax collected across the country stood at Rs 8,49,818.48 crore, indirect tax collection stood at Rs 8,61,515 crore. The share of direct tax collection in the total revenues has gone down from  51.03% in 2015=16 to  49.66% in 2016-17.

Also, despite much of the brouhaha surrounding amnesty schemes for tax evaders, the two schemes  --  Pradhan Mantri Garib Kalyan Yojana (PMGKY) and Income Declaration Scheme (IDS) -- could yield a combined tax revenue of only Rs  15,624 crore.