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Government to lower direct tax collection target, up compliance
January, 19th 2009

The government is likely to pare the direct tax collection target for the current fiscal due to the negative impact of the global economic slowdown on India Incs profitability. The revised estimates are likely to be released during the interim Budget next month.

Sensing trouble, the Income-Tax Department has already initiated efforts to augment tax collection in the remaining part of the fiscal ending on March 31, by deciding to put the name of tax evaders in the public domain.

The direct tax collection target is likely to be lowered to some extent, said a senior finance ministry official familiar with the development. It is likely that the revised target may be fixed at Rs 5,000-10,000 crore lower than the Budget estimate of Rs 3,65,000 crore for 2008-09.

Direct tax collections have declined in November as well as December. They grew by about 11 per cent at Rs 2,30,000 crore in the April-December period of the current fiscal, as against the required growth rate of 16 per cent to achieve the Budget estimate. Similarly, indirect tax (central excise, customs and service tax) collections are also under stress mainly due to the dip in excise and Customs collections from October onwards.

With the indirect tax collections target likely to be lowered by at least Rs 20,000 crore, the government finances have come under stress, which is reflected in the additional government borrowing to fund fiscal incentives, salary hikes and the farm debt waiver. The Income-Tax Department, which held an emergency meeting of the state tax chiefs here on January 16, has prepared an action plan to launch a drive against tax evaders by publishing their names in the public domain and initiating prompt penal proceedings against tax deductors not depositing cash with the exchequer.

It has been decided to start penal proceedings immediately against tax deductors who are deducting tax but not depositing it with the government, said an income-tax official.

With dipping collections from advance tax, which is paid quarterly by companies and individuals based on profit and income projections, the department is focusing on the tax deducted at source (TDS) receipts.

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