This study compares the effects of direct and indirect taxes on GDP in order to examine the relationship between taxes and economic growth in India. The study uses time-series data from 2000–2001 to 2024–2025 in a quantitative, explanatory research approach. The Economic Survey, Ministry of Finance publications, and the Reserve Bank of India are the sources of secondary data. To evaluate the strength and importance of the tax-growth link, analytical tools include multiple regression approaches, ratio analysis, Pearson correlation, and descriptive statistics.
The findings show that there is a substantial and statistically significant positive correlation between GDP and tax revenue. Both direct taxes (r = 0.98) and indirect taxes (r = 0.97) have very high correlation values. According to regression research, direct taxes have a greater effect on GDP (β = 0.72) than indirect taxes (β = 0.41). A structural movement toward a more effective and equitable tax system is indicated by ratio analysis, which also shows an increasing Direct Tax-to-GDP ratio and a decreasing reliance on indirect taxes.
By providing an integrated time-series analysis of India’s tax structure and its effect on GDP over a long period of time, this study closes a major gap and emphasizes the growing significance of direct taxes in promoting economic development.