The central government’s direct tax receipts after adjusting for refunds grew 8.8% in the April to 11 January period to ?18.37 trillion, nearly three-fourths of the full-year target, official data released on Monday showed.
The government aims to collect ?25.2 trillion this fiscal year from corporate and non-corporate tax.
Data showed that before adjusting for refunds, direct tax collection grew 4.1% year-on-year to ?21.49 trillion so far this financial year, but some moderation in refunds helped to improve the net revenue collection growth.
The rationalisation of tax deducted at source (TDS) - by lowering rates and increasing the monetary thresholds in the current fiscal - is seen as a key factor contributing to reduced tax refunds. The government raised the monetary threshold for tax deduction on interest earned by senior citizens from ?50,000 to ?1 lakh. It also raised the annual limit of ?2.40 lakh for TDS on rent to ?6 lakh.
Rohinton Sidhwa, partner at Deloitte India, said that the 8.8% net collection growth is encouraging and seemed to indicate that the government may be on track to achieve the full year target. “However, it is on the back of significantly lower refunds being released to both corporate and individual tax payers,” said Sidhwa.
Revenue rise
Data released by the Central Board of Direct Taxes (CBDT) showed that corporate tax revenue grew 12.4% annually to ?8.63 trillion so far this year, faster than the 10.4% growth forecast in the Union budget. However, revenue from non-corporate tax, which mainly consists of personal income tax collection, expanded slower than the 14.4% growth envisaged in the budget, at 6.4%. In this year’s budget, the government had lowered personal income tax slab rates and offered a rebate for individuals with income up to ?12 lakh ( ?12.75 lakh for salaried individuals) to boost household consumption, savings, and investments.
Income tax rate cuts were expected to moderate the growth in personal income tax collections this year. Central and state governments also implemented mid-year GST rate cuts aimed at stimulating consumption, which could eventually enhance revenue receipts too.
Revenue from securities transaction tax (STT) stood at ?44,866.52 crore, slightly above the receipts in the same period a year ago. Central government’s non-tax revenue collection, which also includes dividend from the Reserve Bank of India (RBI), has been robust this fiscal, helping to balance the budget calculations.
Slower growth
Experts say that the slower-than-expected nominal gross domestic product (GDP) growth this fiscal due to benign inflation would moderate tax collection. While direct tax collection trails the Union budget’s 13% growth assumption, it reflects an improvement over the earlier trend and steady contributions from both corporate and non-corporate taxpayers, said Amit Maheshwari, managing partner, AKM Global, a tax and consulting firm.
“Notably, lower refund outflows have also supported the numbers. Refunds issued during the period declined nearly 17% year-on-year to around ?3.11 lakh crore. To stay aligned with the designated collection target for the year, the Income Tax Department is strengthening compliance efforts, using data analytics to identify discrepancies and improve voluntary reporting,” said Maheshwari.
The recently-launched “Nudge” campaign encourages taxpayers to correct mismatches through soft alerts, rather than through immediate scrutiny, added Maheshwari. Also, the slowing nominal GDP growth will impact direct tax collection going forward, he said.
Please click here to view the full story on Mint.