Effect of Sensex on direct tax collection: an empirical study from India

Direct tax collection is one of the most important sources of revenue for the Government of India, as it accounts for half of the gross tax revenue according to the financial statements of the Government of India. This study attempts to analyse the trend of direct tax collection over the years and the changes in the three main components of corporate tax, personal tax, and other direct tax. It was found that the corporate tax collection was higher than the personal tax collection. The data was collected from the Income Tax Department of India and the Bombay Stock Exchange (BSE). An analysis of direct tax collection and its pattern was conducted. The paper also tries to establish a relationship between direct tax collections and how it is affected by market index namely Sensex. The study analyse the trend of change in direct tax collection in India and relative variation in Sensex. There are studies pertaining to various macro and microeconomic factors though a study linking mentioned two factors is less likely to be seen in India. It is found that there is a moderately positive correlation between direct tax collection and Sensex although the same is not significant.