Coroprate tax collections increased 44% in December, suggesting a smart recovery in corporate performance and increasing the possibility of the government exceeding the overall direct tax collections target for the entire year and making up for the shortfall in indirect tax collections .
A part of the growth is on account of the base effect . Direct taxes collections had declined in December 2008 as the economy bore the brunt of the global financial meltdown . But the trend indicates a firm recovery as corporate tax collections have been largely boosted by December advance tax payments, which is based on projected income of companies.
Higher corporate tax collections have boosted overall direct tax collections that rose by 8.5% during April-December 2009 to Rs 2.5 lakh crore. This trend augurs well for the governand were down by 0.41 % in the April-December period .
The trend indicates corporates that had resorted to cost-cutting measures such as reducing salaries have not yet really begun to spend on this count in order to boost their profits, a finance ministry official said.
A meagre 6.3% growth in corporate TDS (tax deducted at source) payments in the period under review substantiates that spending and investments by companies is only just recovering.
However, the Central Board of Direct Taxes has ment that had set a direct tax collection target of Rs 3.7 lakh crore for 2009-10 .
Interestingly, personal income tax collections have failed to reflect the buoyancy shown by corporate taxes attributed the decline of 19.75% in personal income tax in December to higher refunds.
Negative growth in PIT was largely on account of higher refunds at Rs 8,954 crore against Rs 5,979 crore in the same period last year, an official statement said.