Top Income Tax-Paying States in India: A Five-Year Analysis of Direct Tax Contributions

India’s income tax collection is not evenly distributed across the country. A handful of states contribute a significant share of the nation’s direct tax revenue. Over the past five years, states like Maharashtra, Delhi, Karnataka, Tamil Nadu, and Gujarat have consistently led income tax contributions.

In this article, we’ll break down which states pay the most income tax, why they dominate collections, and what trends have emerged in the last five years.

What Are Direct Taxes?

Before diving into the numbers, let’s clarify what “direct tax” means.

Direct taxes in India include:

• Personal Income Tax
• Corporate Tax
• Securities Transaction Tax
• Other taxes directly paid by individuals or businesses

Income tax and corporate tax together form the bulk of India’s direct tax revenue.

Why Some States Pay More Income Tax

Income tax collection depends on:

• Concentration of corporate headquarters
• High-income salaried professionals
• Strong industrial and service sectors
• Financial and IT hubs
• Urbanization and formal employment

States with major metro cities and financial centers naturally generate higher tax revenue.

Five-Year Net Direct Tax Collections (State-Wise)

Net direct tax collection figures (₹ crore) for the top states from FY19–20 through FY23–24 (provisional) are shown below – based on the Income Tax Department’s official state/UT break-up.

Rank (FY23–24)	State	FY19–20	FY20–21	FY21–22	FY22–23	FY23–24 (Prov.)
1	Maharashtra	3,84,258	3,31,969	5,24,498	6,05,268	7,61,716
2	Karnataka	1,08,973	1,16,255	1,68,678	2,08,169	2,34,098
3	Delhi	1,49,613	1,20,121	1,77,824	2,21,522	2,03,197
4	Tamil Nadu	69,809	61,122	88,438	1,07,064	1,27,067
5	Gujarat	49,518	46,864	71,642	85,019	93,301
6	Telangana	14,046	15,854	27,185	35,434	84,439
7	Haryana	27,824	24,493	37,729	45,650	70,947
8	West Bengal	40,629	40,311	53,775	55,561	60,375
9	Uttar Pradesh	26,990	26,735	34,720	37,983	48,333
10	Kerala	15,164	14,516	19,562	23,983	23,967

(Data source: Income Tax Dept time-series table; FY23–24 figures provisional.)

Share of Direct Taxes (Major States)

Across major contributors, the share of total direct taxes shows concentration:

State	FY19–20 (%)	FY20–21 (%)	FY21–22 (%)	FY22–23 (%)	FY23–24 (%)
Maharashtra	~36.6	~35.1	~37.1	~36.4	~38.8
Karnataka	~10.4	~12.3	~11.9	~12.5	~11.9
Delhi	~14.2	~12.7	~12.6	~13.3	~10.4
Tamil Nadu	~6.6	~6.5	~6.3	~6.4	~6.5
Gujarat	~4.7	~5.0	~5.1	~5.1	~4.8

(Proportions of the grand total net direct tax collections.)

Key insight: The top five states consistently accounted for ~72-74% of all direct tax revenues during FY20–24.

Top Income Tax-Paying States in India (Last Five Years)

While exact yearly figures vary, the ranking has remained relatively stable over the past five financial years.

1. Maharashtra

Consistently the highest contributor

Maharashtra leads India in income tax payments by a large margin.

Why?

• Mumbai is India’s financial capital
• Headquarters of major banks and corporations
• Strong stock market and financial services sector
• Large base of high-income professionals

In most recent years, Maharashtra has contributed roughly 35–40% of total direct tax collections.

2. Delhi (NCT)

Second-largest contributor

Delhi consistently ranks second in direct tax contributions.

Reasons:

• Corporate registrations
• High-income salaried workforce
• Government institutions
• Professional services and consulting firms

Delhi accounts for around 15–18% of total direct tax revenue.

3. Karnataka

IT powerhouse of India

Karnataka, driven largely by Bengaluru, ranks among the top three contributors.

Key drivers:

• IT and tech companies
• Startups and unicorns
• High concentration of software professionals
• Strong export-based services

The state contributes approximately 8–10% of total direct taxes.

4. Tamil Nadu

Manufacturing and services hub

Tamil Nadu’s diversified economy makes it a strong tax contributor.

Economic strengths:

• Automobile manufacturing
• Electronics and hardware
• IT services
• Ports and exports

It consistently ranks among the top five states for income tax payments.

5. Gujarat

Industrial growth leader

Gujarat has seen steady growth in direct tax contributions.

Contributing sectors:

• Petrochemicals
• Pharmaceuticals
• Ports and trade
• Large industrial groups

Its business-friendly environment supports strong corporate tax collections.

Five-Year Trends in Direct Tax Contributions

Here are the key trends observed over the last five years:

1. Post-Pandemic Recovery Boosted Collections

After the slowdown during COVID-19, direct tax collections rebounded strongly due to:

• Corporate profit growth
• Digital economy expansion
• Improved compliance
• Government digitization initiatives

2. Rising Role of the Technology Sector

States with strong IT ecosystems (Karnataka, Maharashtra, Telangana) have seen steady growth in tax contributions.

High-paying tech jobs significantly increase personal income tax collections.

3. Corporate Tax Rationalization Impact

The corporate tax rate cut announced in 2019 initially reduced collections. However:

• Improved compliance
• Increased business activity
• Higher profitability

have helped offset earlier declines.

4. Increasing Tax Compliance Through Digitization

Government initiatives like:

• Faceless assessment
• AIS (Annual Information Statement)
• Better data analytics

have widened the tax base and improved revenue collection.

State-Wise Direct Tax Contribution Snapshot (General Trend)

State	Approximate Share of Direct Taxes
Maharashtra	35–40%
Delhi	15–18%
Karnataka	8–10%
Tamil Nadu	6–8%
Gujarat	6–8%

Note: Figures are based on multi-year trends and official finance data summaries.

What This Means for India’s Economy

The concentration of income tax contributions shows:

• Strong regional economic disparity
• Heavy reliance on a few urban centers
• The importance of financial and tech hubs
• Potential for emerging states to expand formal tax participation

As infrastructure improves and digital business grows, more states may increase their share in coming years.

Key Takeaways

• Maharashtra is India’s top income tax-paying state.
• Delhi and Karnataka consistently follow.
• IT and finance sectors drive large tax collections.
• Direct tax revenue has grown strongly over the past five years.
• Improved compliance and digitization are expanding the tax base.

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