The buoyancy in tax collections has crept into the arrear collection as well. The income-tax department is all set to cross the 2006-07 Budget target for arrears collection, pegged at Rs 11,700.

The department has managed to collect Rs 9,500 crore in arrears in April-December, 2006. Sources said last in the last three months, field formations were busy with filing of returns and scrutiny and now they would focus on collection.

Out of Rs 1,19,250-crore tax arrears as on September 30, Rs 96,249 crore has been categorised as ‘difficult to recover’, an official CBDT release said. It said the government cannot write off the majority of this demand. It said since the litigation had not reached the final stage, the demand can’t be written off.

The government’s fiscal position will be substantially strengthened if it overshoots the target set for arrears as it would get additional resources to meet the sharp rise in expenditure for social sector programmes.

The finance ministry has to provide Rs 63,313 crore in 2006-07, about Rs 12,000 crore more than the revised estimates for 2005-06. The total central plan outlay has been pegged at Rs 2,54,401 crore — Rs 49,063 crore more than the outaly for last fiscal.