Fifteen leading companies are expected to pay 5.42% less income tax for the quarter ending 31 December, compared with the year-earlier period, according to estimates with the income-tax (I-T) department on Monday.
The 15 companies for which estimates were available on Monday include Reliance Industries Ltd (RIL), the second largest private sector company by market value. The total tax they are expected to pay is estimated to fall to Rs.7,186 crore, from Rs.7,598 crore in the year-earlier period.
RIL is expected to pay advance tax of Rs.1,600 crore for the December quarter, up from Rs.1,535 crore a year earlier, according to an I-T official who requested anonymity. Indian companies pay advance tax a fortnight before the end of every quarter on their projected earnings and these numbers are seen by analysts and experts as a proxy for their financial performance, a relationship that usually holds up (it sometimes doesn’t). photo
The top 100 companies are expected to pay third-quarter advance tax this week and the final estimates of how much they pay are expected to be available by Wednesday. The drop in tax paid by the initial 15 companies mirrors the effects of the economic slowdown that has taken a toll on corporate profitability and government revenue collections.
Economic growth was 4.4% in the fiscal first quarter and 4.8% in the second. Finance minister P. Chidambaram has predicted 5% growth for the full financial year. “I am not surprised about companies paying lower tax given the state of the country and stock market. The economy is still in weal shape and there is only modest uptick,” said Saurabh Mukherjea, head of equities at Ambit Capital Pvt. Ltd.
State Bank of India (SBI) paid an advance tax of Rs.1,130 crore for the December quarter of the current fiscal year, down 34% from the Rs.1,710 crore paid in the year-ago quarter, according to a statement released by SBI.
Traditionally, SBI, the country’s largest lender, is one of the largest advance tax-paying entities in the country.
Other companies that paid advance tax on Monday included Housing Development and Finance Corp. Ltd and Yes Bank Ltd. HDFC paid an advance tax of Rs.650 crore for the December quarter of the current fiscal year against Rs.560 crore while Yes Bank paid Rs.268 crore (Rs.210 crore).
Executives at these two companies confirmed the payments. Mahindra and Mahindra Ltd is expected to pay Rs.200 crore (Rs.295 crore), the I-T official quoted above said. In keeping with the norms laid down by the income-tax Act, companies are required to pay 15% of their total advance tax in the first quarter, followed by 30%, 30% and 25% in the next three quarters, respectively.