Advance tax collections, from both corporations and individuals, have surged by 20.73 per cent to reach Rs 3.55 trillion as of mid-September, compared to Rs 2.94 trillion a year ago, according to official data. This considerable increase in direct tax receipts can be attributed to the improved profitability of corporations in the second quarter, system-driven compliance, and various enforcement actions.
The robust growth in tax mop-up will provide the government with additional financial cushioning to support its spending plans and narrow the fiscal deficit gap.
Of the total advance tax collection, India Inc contributed Rs 2.8 trillion, while individuals contributed Rs 74,858 crore between April 1 and September 16.
The overall direct tax collection (net of refunds) experienced a growth of over 23.5 per cent, reaching Rs 8.65 trillion during this period. This includes corporate income-tax of Rs 4.16 trillion and personal income-tax, including securities transaction tax, of Rs 4.47 trillion.
This growth exceeds the projected growth rate of around 10 per cent for the entire financial year, indicating that the direct tax collection target is likely to be comfortably met.
The Centre has set a budgetary target of Rs 18.23 trillion for direct taxes in the current financial year (2023-24), with Rs 9.2 trillion from corporates and Rs 9 trillion from individuals. Previously, there were concerns about the pace of direct tax collection due to a decline in corporate tax receipts during the April-July period. As of June 17, advance tax stood at Rs 1.16 trillion, showing a growth of 13.7 per cent, while net collection reached Rs 3.79 trillion.
Advance tax is paid in four instalments as income is earned throughout the financial year, rather than at the end.
It is considered an indicator of economic sentiment, with the first instalment, equivalent to 15 per cent of advance tax, due by June 15, the second by September 15 (30 per cent), the third by December 15 (30 per cent), and the remaining by March 15.
“The collections witnessed a 23.5 per cent increase from the corresponding period of the last financial year when collections amounted to Rs 7 trillion. The government has issued refunds amounting to Rs 1.21 trillion until September 16,” stated the Central Board of Direct Taxes (CBDT) while releasing provisional figures.
On a gross basis (before adjusting for refunds), the collection stood at Rs 9.87 trillion compared to Rs 8.34 trillion, representing a growth of 18.29 per cent compared to the corresponding period a year ago, according to CBDT.
The minor head-wise collection comprises cumulative advance tax, tax deducted at source of Rs 5.19 trillion; self-assessment tax of Rs 82,460 crore; regular assessment tax of Rs 21,175 crore; and tax under other minor heads of Rs 8,248 crore, as noted by CBDT.
This robust direct tax collection comes as a relief following subdued growth in India’s gross tax revenue, including both direct and indirect taxes, between April and July. It rose by a mere 2.8 per cent to Rs 8.9 trillion compared to the same period a year ago.
Net tax revenue contracted by 12.6 per cent to Rs 5.8 trillion up to July, accounting for 25 per cent of the Rs 23.3 trillion full-year target. This contraction can be attributed to the increased tax devolution to states during this period.