NEW DELHI : The Centre's direct tax collections have exceeded the revised estimates for 2021-22 by a sharp ₹1.13 trillion on the back of robust advance tax mop-up in the last quarter of the fiscal, according to data released by the central board of direct taxes (CBDT). This will provide the government with additional spending room as the Russia-Ukraine conflict causes a spike in global commodity and fuel prices.
Direct tax collections, net of refunds, comprising the corporation tax and personal income tax touched ₹13.63 trillion as on 16 March, which is 9% higher than the revised estimates for 2021-22 at ₹12.5 trillion announced last month. The direct tax collections after the Q4 advance tax payments are 48% higher than the corresponding period last year, data released by the CBDT showed on Thursday.
Mumbai recorded the highest collection at ₹4.5 trillion, a growth of 48% over last year. Bengaluru, Delhi, and Chennai posted growth in direct tax mop up by 44%, 38.1%, and 48% respectively
Advance tax is paid as and when the money is earned in four installments rather at the end of the fiscal year. Gross direct tax collections (before refunds) stood at ₹15.5 trillion, up 38% compared to ₹11.2 trillion in the corresponding period of 2020-21.. Refunds are down 7.42% viz a viz last year at ₹1.87 trillion.
“The better-than-expected tax collections can be attributed to the revival in corporate earnings. They have been hiring. There is an improvement in the economic outlook post Covid. The collections exceeding the revised estimates is in line with expectations as some room was kept to account for contingencies," said a government official.
The first installment or 15% of advance tax is to be paid by15 June, the second by15 September (30%), third by 15 December (30%) and the rest by 15 March. Direct tax collection had for the first time in four years exceeded the revised budget target in 2020-21 touching ₹9.44 trillion compared to the RE of ₹9.05 trillion.
Experts say economic recovery and job market resurgence has upped revenue collections.
Rakesh Nangia, Chairman, Nangia Anderson India said that the recovery across sectors and revival of the job market have perked up government's revenue collections. "Aided by revival of economic activities and better compliance, the Union government’s advance direct tax collections have surpassed the targets. Healthy expansion in advance tax collection reinforces our view that the recovery is K-shaped, with the formal sectors gaining market share," he added..
The Centre moved a supplementary demand for grants in the Parliament last week to spend an additional Rs 1.07 trillion in the current fiscal. It includes a ₹15,000 crore outlay for fertilizer subsidy in the wake of rising global fertilizer prices due to the Russia Ukraine war. Hence, the better-than-expected mop up will cushion fiscal deficit, estimated at 6.9% of GDP, especially as disinvestment proceeds from LIC will also not come in with the IPO pushed to FY23.
Corporation tax collections at ₹7.19 trillion have exceeded the revised estimates by 13.2% to ₹85,000 crore. The corporation tax mop-up is 50% higher compared to the corresponding period last year. Personal income tax collection at ₹6.17 trillion is ₹2,000 crore higher than the RE as on March 16 and posted a 46.5% growth over the same period of 2020-21.
Government officials also attributed the robust tax collections to increased enforcement due to the sharing of goods and services tax (GST) data with the Central Board of Direct Taxes (CBDT) and easier compliance.
In the Union Budget presented last month, the corporation tax RE for the current fiscal was up 16% over the budget estimates and that for personal income.tax was 9.6% higher than the BE. This translated into a 14.2% upward revision in the direct tax collection target for FY22 compared to the BE.
Advance tax collection in 2021-22 up to 16 March stood at Rs6.62 trillion , which is 40.75% higher than the previous fiscal and 50.56% higher than 2019-20. Of the total advance tax collected, ₹4.84 trillion was on account of corporation tax and ₹1.78 trillion from personal income tax.
"This amount is expected to increase as further information is awaited from banks," the CBDT said in a release on Thursday.
