A new report from Bank of Baroda spotlights India’s fiscal prowess: its tax-to-GDP ratio has advanced to 19.6 percent, surpassing Hong Kong, Malaysia, and Indonesia in the emerging markets league.
This holistic indicator, inclusive of central and state taxes, reveals enhanced collection efficacy and adherence. Central revenues at 11.7 percent of GDP gain heft from states, illustrating a cohesive national effort.
Comparative lenses show room for growth—far from Germany’s 38 percent or the US’s 25.6 percent—but India’s demographic advantages make closing this chasm a compelling prospect.
Targeted reforms in tax simplification, optimization, and tech integration are underway. The 2025 Income Tax Act and corporate structure tweaks are set to foster openness and compliance ease.
From April 2026, the revamped act will likely onboard informal segments, fortifying the tax base. Historical trends indicate deepening links between collections and nominal GDP.
Income taxes track per capita earnings and better compliance closely, as corporate taxes capitalize on profitability upticks, outpacing prior patterns. This foundation bodes well for future revenue expansion.