Sharp drop in direct tax collections in Q1

With the extensive lockdown in place through April and May, gross direct tax collections in the first quarter of fiscal 2021 has witnessed a sharp decline. Gross tax collection, which stood at Rs 1, 99, 755 crores during Apr-June 2019 has dropped by a whopping 31% to Rs 1, 37, 825 crores in the same period of this year. Gross corporate tax collections have fallen by 40% to Rs 61, 816 crores while gross income tax have dropped by 22% to Rs 73, 280 crores. During April and May, with a nationwide lockdown in place, it is estimated that around 80% of all economic activity was suspended. Besides the lockdown, lower rates of corporate tax and minimum alternate tax (MAT) announced last fiscal have also impacted collections. The headline corporate tax rate was cut last year to 22% from 30% for firms not availing any exemptions. Moreover, even for firms opting for the older regime, MAT was cut to 15% from 18.5% in September last year.

Advance income tax collections have dropped from Rs 48, 917 crore in Q1, FY20 to Rs 11,714 crores in the same period of current fiscal – a drop of 76% which is the steepest ever recorded drop. Advance tax from corporate assessees is down by 79% – from close Rs 40, 000 crore same period last year to Rs 8286 crores. Advance tax collection from individual assessees has also declined by 64% – from Rs 9512 crores to Rs 3428 crores. The sharp drop in direct tax collections is another indicator of the severe blow on the Indian economy from the covid-19 pandemic and the resultant lockdown. All though a release from lockdown has been initiated post June 1, pace of resumption has been slow till date.

The budget estimate for direct tax collection in the current fiscal is Rs 13.2 lakh crores, which would require a growth rate of 27% from the actual collections in FY20 (Rs 10.37 lakh crores), which looks a nearly impossible target at this point of time.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s