First-quarter net direct tax collections for 2008-09 show that corporate India's profitability is more or less intact despite fears of a slowdown induced by high oil prices, inflation and interest rates.
Net direct tax collections rose 38.6 per cent in the quarter, lower than the 47.5 per cent growth of the same quarter last year, an indication that the economy remains resilient.
First-quarter tax collections reflect advance tax payments and tax deducted at source (TDS). The data show that TDS collections grew sharply at about 50 per cent and corporation tax collections grew nearly 33 per cent at Rs 34,566 crore against Rs 26,058 crore in the same period last year.
Personal income tax (including fringe benefit tax, securities transaction tax and banking cash transaction tax) grew 48.84 per cent to Rs 22,782 crore against Rs 15,306 crore.
While there is a dip in the growth rate on a year-on-year basis, the moderation can be attributed to higher refunds and an expanded collection base.
"Overall direct tax collection growth looks good, despite higher inflation and high oil prices. However, it also hides some sectoral imbalances in collections from cement and real estate," said a leading tax consultant.
"Direct tax collection growth indicates that the economy is not in a very bad state," said an income tax department official.
"There could be some moderation in growth in advance tax payments going forward due to some decline in industrial output. But, overall tax collection growth may not be impacted much," the official added.
Net direct tax collection needs to grow 25 per cent to achieve the income tax department's internal target of Rs 3,95,000 crore in 2008-09 from Rs 3,14,000 crore in 2007-08.
In addition, the cost of direct tax collections dropped to an all-time low of 0.54 per cent in 2007-08, amongst the lowest in the world, officials claimed.