Indicating slowdown in economic growth, advance tax collections declined in the third quarter, ending December, by over 22% to Rs
42,600 crore from Rs 54,900 crore a year ago. For the first three quarters ended December 15, advance tax collection fell 2.6% to Rs 1,13,000 crore from Rs 1,16,000 crore in the corresponding period last year, a finance ministry official, who did not wish to be identified, said.
This brings down the growth rate in direct tax collections for the first nine months to 12% and raises the distinct possibility of the government missing the budget target of a 15% increase in direct tax collections this fiscal to net Rs 3,65,000 crore. Personal income tax deducted at source has shored up aggregate collection of direct taxes, which comprise taxes on corporate incomes including dividend distribution tax and fringe benefit tax, taxes on personal incomes, securities transaction tax and a minuscule amount of wealth tax, apart from collections of arrears on these counts.
Advance tax is paid in four instalments by corporate and non-corporate assessees other than salaried employees in June, September, December and March, and is based on the taxpayers own estimates of their incomes. It, thus, gives an indication of overall economic health. The last date for payment of the third instalment of advance tax was December 15. The fourth and the last instalment will fall due on March 15. Salaried employees have their tax deducted at source on a monthly basis.
Direct tax collections in November 2008 had dropped 36.09% to Rs 10,346 crore from Rs 16,189 crore in November 2007.
The drop in direct tax collections in November and subsequently in advance tax has pulled down the cumulative growth rate from 22% in April-November, 2008 to about 11% in April-December, 2008. Collections stood at Rs 2,32,000 crore till December 24, 2008, compared to Rs 2,08,000 crore in April-December, 2007. A growth rate of 15% is required to meet the budget estimate of Rs 3,65,000 crore in the current financial year. The official said it may now be difficult to achieve the Central Board of Direct Taxes' internal target of Rs 3,95,000 crore.
Last four financial years have been a sort of a dream run for direct taxes, which witnessed an over 30% compound annual growth rate in the period on the back of a booming economy. But the slowing economy has cast its shadow on the direct taxes as well. Indias GDP grew 7.8% in the first six months of the current fiscal against 9.3% in the same period last fiscal. Industrial production in October declined by 0.4% for the first time in 15 years, clearly indicating that the manufacturing sector had been impacted by the global financial meltdown