Digitization, new forms boost direct tax mop-up 23.5%

Direct taxes collected so far, including the first two instalments of advance tax collections, show a 23.5% growth over the tax receipts from these sources a year ago, CBDT said.

The Centre had projected a 10.5% annual growth in direct tax collection in the current fiscal year at ₹18.2 trillion.

After refunds, the tax authority collected ₹4.16 trillion in corporate tax revenue, accounting for 45% of the full-year target and ₹4.47 trillion in personal income tax revenue, representing half of the full-year target. Personal income tax collections include securities transaction tax levied on the sale of listed equity shares.

Although the tax collection growth in the initial quarters appears way above the government’s full-year projections, experts believe it would converge with the government’s projections.

“The full-year tax collection figures are expected to pan out broadly in line with budget estimates. The tax collection growth seen in the initial quarters is expected to normalize as per budget projections by the end of the fiscal,” said Sachchidanand Shukla, group chief economist at Larsen & Toubro Ltd. One has to be cognizant of the nominal GDP (gross domestic product) growth rate while looking at tax collection figures as the two are linked, said Shukla.

India’s nominal GDP growth stood at 8% in the June quarter, compared to 27.7% in the year-ago period. In real terms, India’s GDP is expected to grow more or less as officially projected 6.5% this fiscal, provided El Nino doesn’t have a big negative impact, Shukla said.

The Centre’s direct tax collections have recently received a strong boost from extensive digitization of the tax administration, data collection from diverse sources and presenting pre-filled tax returns to the taxpayer using the information already available with the tax authority. This helps in the inclusion of sources of income, which one could otherwise miss at the time of filing the tax returns.

Also, the tax department had scaled up the use of a key mode of revenue collection—taxes to be deducted at source (TDS) by entities while making payments to persons which form part of their income. This not only fetches upfront a part of the taxes to be paid by those receiving various payments but also helps in tracking transactions to ensure that they do not escape taxation.

CBDT’s data showed that TDS of ₹5.19 trillion accounted for a big part of the direct taxes collected so far this year. Advance tax, a mode of paying taxes in four instalments over the course of the full year, contributed to ₹3.5 trillion up to 16 September, with two instalments coming in.

The tax authority also refunded ₹1.22 trillion up to 16 September. Gross direct tax receipts before refunds stood at ₹9.87 trillion. The Centre has set a gross tax collection target of ₹33.6 trillion for this year, of which more than half is to come from direct taxes.

On the indirect tax side, the Centre’s goods and services tax (GST) collections have also so far shown strong growth. Data from the Controller General of Accounts (CGA) showed that at the end of July, the Centre’s fiscal deficit or the gap between receipts and spending met through borrowing, stood at a third of the ₹17.8 trillion budgeted for the full year indicating that government’s budget management was in order.

Strong tax receipts will ease the pressure on the government to meet the ₹51,000 crore target for selling stakes in state-run firms this year.

Updated: 19 Sep 2023, 12:19 AM IST