The country's financial capital Mumbai may still be on the top of the table in terms of paying direct taxes but smaller cities are catching up fast with many of them such as Chandigarh, Lucknow and Kanpur exceeding government's expectations by recording 25-78 per cent growth.

The unexpected rise in growth of direct taxes, including corporate tax and income tax, in smaller cities in the range of 25-78 per cent this year as against a target of 9-20 per cent has proved to be a windfall for Income Tax Department.

"Smaller cities have shown a substantial growth in tax collections due to addition of high salary jobs in the IT, real estate, auto, finance and retail sectors, which has resulted in rise in tax collections, even beyond our expectations," a senior Finance Ministry official said.

Out of total Rs 60,970 crore collected till August 31 this year, these towns contributed over one-third of the total collections. Although the higher percentage growth comes on the back of a lower base, it reflects the rising economic activities in smaller towns and cities.

For instance, in the economically backward considered state of Uttar Pradesh, the Lucknow region has shown a growth of 78.57 per cent in tax collections, as against an expected target of 19.16 per cent within a year.

Corporate tax collections touched Rs 182 crore as against Rs 76 crore previous year. The neighbouring Kanpur region has also shown a growth of 62.28 per cent as against expected target of 18.14 per cent till August end this year.

The department has shown a massive increase in net collection of direct taxes, estimated to touch Rs 1,09,000 crore till September 15 over Rs 77,000 crore a year ago.