Impact of Income Tax on Growth of GDP With Special Reference to Karnataka.

Abstract

This study explores the intricate relationship between income tax revenues and the growth of Gross Domestic Product (GDP), with a specific focus on the state of Karnataka. Income tax, as a direct tax instrument, plays a crucial role in mobilizing public revenue and financing development activities. The paper examines how changes in income tax policies, rates, and collections influence the economic growth of Karnataka by analyzing trends over the past decade. Through a combination of secondary data analysis from government reports, economic surveys, and budget documents, the research investigates the correlation between tax collection efficiency and key growth indicators such as state GDP (GSDP), employment, and investment. The findings reveal that while increased income tax compliance and collection contribute positively to state revenue, excessive taxation may discourage entrepreneurship and investment, thereby impacting GDP growth. The study concludes with policy recommendations to optimize tax structures for sustainable economic development in Karnataka, balancing fiscal needs with economic incentives.