Direct tax collections likely to drop in current fiscal year, first fall in at least two decades, IT dept receives only Rs 7.3 lakh cr so far

India’s corporate and income tax collection for the current year is likely to fall for the first time in at least two decades, over half a dozen senior tax officials told Reuters, amid a sharp fall in economic growth and cut in corporate tax rates

Reuters January 24, 2020 16:57:15 IST
Direct tax collections likely to drop in current fiscal year, first fall in at least two decades, IT dept receives only Rs 7.3 lakh cr so far
  • Govt was targeting direct tax collection of Rs 13.5 lakh crore ($189 billion) for the year ending 31 March - a 17 percent increase over the prior fiscal year

  • However, a sharp decline in demand has stung businesses, forcing companies to cut investment and jobs, denting tax collections and prompting the government to forecast 5 percent growth for this fiscal year - the slowest in 11 years

  • The tax department had managed to collect only Rs 7.3 lakh crore as of 23 January, more than 5.5 percent below the amount collected by the same point last year, said a senior tax official

Mumbai: India’s corporate and income tax collection for the current year is likely to fall for the first time in at least two decades, over half a dozen senior tax officials told Reuters, amid a sharp fall in economic growth and cut in corporate tax rates.

Prime Minister Narendra Modi’s government was targeting direct tax collection of Rs 13.5 lakh crore ($189 billion) for the year ending 31 March - a 17 percent increase over the prior fiscal year.

However, a sharp decline in demand has stung businesses, forcing companies to cut investment and jobs, denting tax collections and prompting the government to forecast 5 percent growth for this fiscal year - the slowest in 11 years.

Direct tax collections likely to drop in current fiscal year first fall in at least two decades IT dept receives only Rs 73 lakh cr so far

Representational image. Reuters.

The tax department had managed to collect only Rs 7.3 lakh crore as of 23 January, more than 5.5 percent below the amount collected by the same point last year, said a senior tax official.

After collecting taxes from companies in advance for the first three quarters, officials typically garner about 30-35 percent of annual direct taxes in the final three months, data from the past three years shows.

But eight senior tax officials interviewed by Reuters said despite their best efforts direct tax collections this financial year were likely to fall below the Rs 11.5 lakh crore collected in 2018-19.

“Forget the target. This will be the first time that we’ll see a fall in direct tax collection ever,” said a tax official in New Delhi.

He estimates that direct tax collections for this year could end up roughly 10 percent below fiscal 2019.

Direct taxes typically account for about 80 percent of the government’s projections for annual revenue, and the shortfall may leave the government needing to boost borrowing to meet expenditure commitments.

The tax officials also say that a surprise cut in headline corporate tax rate last year aimed at wooing manufacturers and boosting investment in Asia’s third-biggest economy is another key reason behind the sluggish tax collections.

“We’ll be very happy if we can even breakeven with what we collected last year,” said another senior tax official in the financial capital Mumbai, the biggest tax generator, accounting for about a third of revenues from direct taxes. “But given the state of the economy, I’m not too hopeful.”

Updated Date:

Subscribe to Moneycontrol Pro at ₹499 for the first year. Use code PRO499. Limited period offer. *T&C apply

also read

Bharat Bandh: Transporters association to protest against new E-Way Bill, rising fuel prices today
India

Bharat Bandh: Transporters association to protest against new E-Way Bill, rising fuel prices today

'All state-level transport associations have confirmed their support to the AITWA, also in protest against the fuel price hike,' said association national president

Centre can cut excise duty on petrol, diesel by Rs 8.5 a litre without hurting revenues, say experts
India

Centre can cut excise duty on petrol, diesel by Rs 8.5 a litre without hurting revenues, say experts

Central and state taxes make up for 60 percent of the retail selling price of petrol, available at Rs 91.17 per litre in Delhi and over 54 percent of diesel which is available for Rs 81.47 in the National Capital

US Supreme Court refuses to halt turnover of Donald Trump's tax records to New York prosecutors
World

US Supreme Court refuses to halt turnover of Donald Trump's tax records to New York prosecutors

The nation's highest court delivered a blow to the ex-president, who has been waging a protracted legal battle to prevent his tax records from being handed over to Manhattan District Attorney Cyrus Vance