Direct tax receipts rose 71.3% in the first two months of the current fiscal year from a year ago, indicating the economy was sustaining its growth pace. The buoyancy in revenue collection comes as a relief for the government, which is struggling to meet fiscal deficit targets amid the pressures of a soaring subsidy bill and farm debt waiver.

The Central Board of Direct Taxes on Wednesday said that corporate tax receipts in the April-May period rose 68.05% to Rs 8,126 crore, up from Rs 3,185 crore in the same period last year. Income tax collections (including FBT, STT and BCTT) grew 73.05% to Rs 14,690 crore, up from Rs 8,489 crore. Total direct taxes for the two-month period stood at Rs 22,840 crore, up from Rs.13,335 crore.

The robust growth in direct taxes has been achieved despite larger refund payouts at Rs 9,014 crore, the CBDT said.

Last week, the finance minister urged the board to raise the annual target for direct tax collections to Rs 400,000 crore from the budget estimate of Rs 3,65,000 crore. Tax deducted at source (TDS) continued to grow this fiscal at about 51%, i.e. the same level as in the last fiscal.

Refunds were issued to over 48 lakh taxpayers, compared to about 44.5 lakh worth of refunds in the previous fiscal (2006-07). According to CBDT, the Income Tax department endeavours to provide better taxpayer services, particularly in issuing of refunds. Therefore, the criteria for issuing refunds without verification of TDS instruments have been relaxed to gross TDS claims of up to Rs 5 lakh and net refund claim of Rs 25,000 per taxpayer.

Under the relaxed criteria, about 92% of the refund claims for fiscal 2007-08 will be settled without asking taxpayers to produce the TDS certificates/challans in cases of mismatch, the board said.

The board attributed the growth in direct tax collections to better tax compliance by the taxpayers and an improved tax administration. The cost of collection has declined to an all-time low of 0.54% during 2007-08, which is among the lowest in the world, the board said.