'From ₹14.12 lakh crore to ₹23.40 lakh crore in 5 years': How govt is tightening the tax net

The government has stepped up efforts to curb tax evasion and improve compliance through tighter reporting requirements, data-based monitoring and technology-driven checks, even as the number of people filing income-tax returns rose by nearly 24% over the past five years.

According to a written reply by Minister of State for Finance Pankaj Chaudhary in the Lok Sabha on Monday, the number of income-tax return filers increased from 6.96 crore in 2021-22 to 8.67 crore in 2025-26. In absolute terms the return filers increased by 17,046,901 in five years.

To prevent fraudulent GST claims, detecting under-reporting of income and make tax transactions more traceable, the government introduced a slew of measures.

Data-based monitoring to detect tax evasion

On the direct-tax side, the government has made PAN quoting mandatory for specified transactions and PAN-Aadhaar linking compulsory.

It has also expanded the use of the Annual Information Statement (AIS), which provides taxpayers with information on their income, financial transactions and tax details for a financial year. Chaudhary said the increased transparency makes it easier to detect under-reporting or omission of income.

The Income Tax Department has also been using its NUDGE campaign to encourage taxpayers to correct their returns. Under the initiative, taxpayers are contacted through SMS and email and encouraged to use revised or updated returns to disclose unreported income.

Crackdown on black money, benami assets

The minister also cited the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, aimed at tackling undisclosed foreign income and assets.

The Benami Transactions (Prohibition) Act was amended in 2016 to enable confiscation of benami property and prosecution of both benamidars and beneficial owners, the ministry said.

The government has also prohibited cash receipts of ₹2 lakh or more, except through permitted electronic modes, under the Income-tax Act, 2025.

GST compliance gets technology push

The government has similarly strengthened compliance under GST with the introduction of Invoice Management System (IMS) in 2024. It allows recipient taxpayers to accept, reject or keep supplier invoices pending and enables businesses to cross-check invoices reported by suppliers before claiming input tax credit (ITC).

Two nationwide drives -- one between May and August 2023 and another between August and October 2024 -- were also conducted against fake GST registrations and fraudulent passing of ITC by the Union government. Among others these drives also included physical verification of business premises by tax officials.

Other measures include e-invoicing integration, biometric Aadhaar authentication for GST registration and mandatory sequential filing of GSTR-1 and GSTR-3B. The minister informed that these measures helped reconcile invoices and strengthen the ITC claim process.

Tax collections rise alongside compliance measures

The rise in return filers has come alongside a substantial increase in tax collections. Net direct-tax collections rose from ₹14.12 lakh crore in 2021-22 to ₹23.40 lakh crore in 2025-26, according to the Finance Ministry's data.

Net indirect-tax collections, meanwhile, increased from ₹12.90 lakh crore in 2021-22 to ₹16.72 lakh crore in 2025-26.

GST collections and distribution to states

GST collections have also grown significantly since its implementation. The ministry's data shows that the combined revenue from SGST (gross), IGST settlements and GST compensation rose from ₹3.33 lakh crore in FY 2017-18 to ₹9.81 lakh crore in FY 2024-25.

Of this, SGST (gross) increased from ₹1.72 lakh crore to ₹5.16 lakh crore, while IGST settlements rose from ₹1.20 lakh crore to ₹4.57 lakh crore.

The data also shows a broad increase in revenue accruing to states since GST was introduced. Total revenue rose from ₹3.33 lakh crore in FY 2017-18 to ₹9.19 lakh crore in FY 2022-23, before reaching ₹9.80 lakh crore in FY 2024-25. The increase has been driven primarily by higher SGST collections and IGST settlements, even as GST compensation has reduced significantly in recent years.