New Delhi, Jan 25 (NationPress) The tax-to-GDP ratio for India has now achieved 19.6 percent, aligning the country with several major global economies and demonstrating ongoing improvements in tax collection efficiency, as reported by the Bank of Baroda.

This ratio encompasses both central and state tax revenues, surpassing those of various emerging markets like Hong Kong, Malaysia, and Indonesia.

The report highlights that while India’s central gross tax revenue is at 11.7 percent of GDP, the overall figure indicates enhanced participation from states and better compliance throughout the system.

Nevertheless, India still lags behind advanced economies such as Germany, which boasts a tax-to-GDP ratio of approximately 38 percent, and the United States, with a ratio around 25.6 percent.

The Bank of Baroda report identifies this disparity as a significant policy opportunity for India, particularly considering its favorable demographic profile.

Furthermore, the report emphasizes the government's increasing commitment to comprehensive tax reforms focused on simplification, rationalization, and digitization.

These initiatives are anticipated to further elevate the tax-to-GDP ratio in the upcoming years.

Key regulatory measures, such as the implementation of the Income Tax Act, 2025, and the restructuring of corporate tax frameworks, are expected to enhance transparency and ease compliance.

The new Income Tax Act, which is set to be implemented on April 1, 2026, aims to broaden the tax base by integrating more of the informal economy into the formal framework.

The report's historical analysis indicates that tax collections and nominal GDP have begun to align more closely over time.

Between FY93 and FY02, this relationship fluctuated due to a limited tax base. However, from FY14 onward, a notable convergence has been observed, becoming increasingly pronounced since FY23.

Current data reveal that tax elasticity stands at approximately 1.1, which is above the long-term average. This suggests that tax collections are expanding faster than the overall economy.

Moreover, the report found a strong positive correlation between various tax components and macroeconomic indicators.

Income tax collections demonstrate a robust relationship with both nominal GDP and per capita income, showcasing rising incomes and enhanced compliance.

Corporate tax collections have also gained from improved company profitability, with buoyancy levels remaining solid in comparison to historical trends.