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FY25 corporate tax collections may miss Budget Estimate

The corporate income tax (CIT) collections for the upcoming fiscal year FY25 might fall below the projected 13% outlined in the interim Budget, as the government’s priority is on expediting the resolution of appeals and issuing refunds, a senior official told FE.

“We may not achieve the 13% growth in corporate tax collections in FY25, as our focus is on bigger appeals. We want the bigger appeals to be decided fast, and issue refunds, wherever required,” the official said, asking not to be idenitified. “From this year (FY24), appeals have picked up.”

According to reports, the count of appeals pending with the income tax department as of March 31, 2023, rose to 516,000 from 496,000 as of March 31, 2022. Among these, more than 280,000 appeals have remained pending for over three years.

As per government data, the total amount under dispute pertaining to corporate taxes, till the end of FY23, stood at Rs 5.98 trillion. By the end of FY22, the amount under dispute was at Rs 4.78 trillion. 

The interim Budget has projected corporate tax collections to rise 13% on year to Rs 10.4 trillion in FY25, from Rs 9.2 trillion expected in the revised estimate (RE) of FY24. CIT collections account for about 27% of the gross tax revenue (GTR), which itself is expected to grow at 11.5% next year.

In the current fiscal, the RE has projected CIT mop-up to rise 11.7% on year, which is lower than the 18.7% growth achieved in April-December of FY24.

On the personal income tax (PIT) front, the official sees the FY25 Budget estimate to be “slightly conservative”. In the next fiscal, the Budget expects PIT collections to rise 13.1% from the RE.

“In FY24, we’ve seen substantially higher growth in PIT, than what the Budget had pegged…we may see that next year as well, although not to this extent,” said the official. 

The BE for FY24 had projected PIT collections to grow 8.1% on year, but the RE sees it growing at 22.7%, the highest growth achieved since 2000-2001.

Rohinton Sidhwa, Partner, Deloitte India, says the direct tax estimates seem conservative. “Appeals and refunds do impact collections albeit 80-85% collections are advance taxes, TDS and TCS,” he said.

Sandeep Sehgal, Tax- Partner, AKM Global, said, “Tax collections can be potentially reduced in cases where appeal effect is required to be given by the tax officer after getting a relief appeal order and also where only 20% of amount of tax demand is paid under protest by the taxpayer to move against the appeal orders in the tribunals.”

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