The tax office is exploring all avenues to mop up revenue collection before March 31. In an unusual development, hundreds of companies have received letters from the income-tax department, "requesting" them to deposit the amount from tax deductions before the financial year closes — as against the normal practice of companies depositing the tax deducted at source (TDS) by the seventh of next month.

"I have never seen the department writing letters to collect TDS before March 31. Given the tight liquidity position, companies would prefer paying TDS by April 7 which is the deadline," said a senior Mumbai-based chartered accountant.

"In the past, our clients may have received phone calls. But this year, the department has not only written letters but in many cases has even asked companies to depute senior officials to appear before the department on a specified date and time," said the chartered accountant.

One such letter to a mid-sized company reads like this: "The Department of income tax, as you are aware, plays an important role in collection of revenue for the purpose of targeted rate of National Growth. As a part of this Target, the charge of CCIT TDS Mumbai has been allotted a target of Rs 66,945 crores. With the prevailing rate of growth of the "Economy", the achievement of this target becomes very challenging.....This letter is issued with a request that necessary arrangements may please be made at your end so that tax deductions arising or accruing in the month of March 2015 are duly deposited before 31.03.2015."

Pay TDS by March 31, Income Tax department requests companies"This may not be technically illegal as it is not a notice, but a request," said another tax professional, "but it's strange and somewhat high-handed."

TDS is applicable on salary, interest, professional fees, rent, contract value, brokerage and all payments to NRIs. A company deducting tax from salaries on 30th of a month is allowed to enjoy liquidity for a week before it deposits the amount by the 7th of the following month. According to tax circles, one of the reasons for the shortfall is a circular issued by Central Board of Direct Taxes, allowing the deduction of TDS only on the principal value of a service (excluding the service tax). (For instance, if the service fee is Rs 1 lakh, assesses were allowed to pay TDS on Rs 1 lakh instead of paying it onRs 1,12,360 which includes the service tax amount.)

"Since close to Rs 70,000 crore is collected from Mumbai, there is a shortfall due to the change in TDS computation. This is one of the reasons besides slow business and poor earnings of companies," said a tax official.

Still, some of the industry officials believe that the shortfall in direct tax target may not be too large. As against Rs 2 lakh crore collected in the last two months of FY14, the department has to raise aroundRs 2.35 lakh crore this fiscal. The revised estimate for direct tax collection in the Budget is Rs 7.05 lakh crore (as against a budget estimate of Rs 7.35 lakh crore). Total collection between April '14 and January '15 has been Rs 4.7 lakh crore.