Public sector banks, asked to pay more advance tax
March, 09th 2010
The Centre has asked public sector insurance companies and banks to enhance their advance tax payments in the fourth quarter of this year.
Top bank and insurance company officials said that the government had individually asked all the pubic sector undertakings in the financial sector to make more payments this year. This is to avert the possibilities of fiscal slippages in the revised estimates for the current year.
Some PSU insurers and banks have already made the advance tax payments or are in the process of doing so ahead of the deadline. There are fears that there is likely to be some slippage in the revenue receipts estimates. This year, the revised estimate for corporate tax collections is Rs 2.55 lakh crore. However, till February the actual collection, according to the Central Board for Direct Taxes, was Rs 1.80 lakh crore. This implied that at least Rs 75,000 crore would have to be raised by the end of the current month or about Rs 24,000 crore more than what was raised in March 2009.
The sources said, in 2008-09 also the Government had faced a similar situation. This was reflected in the difference between final estimate that was Rs 2.13 lakh crore, and the revised estimate for the same period at Rs 2.22 lakh crore.
Although, for the fourth quarter, advance tax receipts are estimated at Rs 55,000 crore, it would still mean a shortfall, leading to a slippage in the revised fiscal deficit estimate of 6.7 per cent.With the oil import basket price at close to $79 a barrel, subsidy payout to the companies is also expected to mount.
Subsidy payouts are currently estimated at Rs 14,954 crore to the petroleum companies. Higher payouts and reduced revenue realisations would automatically translate into fiscal slippages.
However, there is little reluctance from the PSU financial institutions against payment of higher taxes.
Last year, public sector banks had paid out close to Rs 20,000 crore as taxes to the government. This year's generosity on the part of banks stemmed from interest payouts from refunds. Interest on tax refunds is currently at 0.5 per cent for every month.
In the case of the insurers, the tax demand situation is slightly different. General insurers' stress on the balance sheet this year was largely on account of continuing high underwriting losses. In addition, unlike the previous years all of them have earned lower profits from investment trading.
Expenses and claims
The excess of expenses and claims over the premiums earned continues to remain red-lined this year as well at about 110 per cent. The bulk of the advance tax largesse is likely to come from Life Insurance Corporation of India. LIC last year paid out Rs 3,800 crore as taxes. Non-life insurers' pay-out was about Rs 300 crore.