India's April-January direct tax receipts were up by a slower-than-expected 12.5 percent on-year, a senior official said on Wednesday, as the global turmoil and sluggish domestic demand trimmed corporate profits.

The data has fuelled speculation of higher market borrowing by a cash-strapped government that has pledged to spend an extra 1.47 trillion rupees in FY09 and foregone revenues by cutting factory gate duties by 4 percentage points in December.

Indian firms, which anticipate slower profit growth, have paid 22 percent less advance tax to the government during the December quarter, compared to year-ago figures.

"The direct tax collection touched 2,47,000 crore (2.47 trillion) rupees as on Feb. 1, growing by 12.5 percent," said S.S.N. Moorthy, the chairman of Central Board of Direct Taxes.

Direct tax receipts, which were up 39 percent until the June quarter, began to slow as the global financial crisis started pinching Indian companies.

Last year, India set a target of 20 percent growth in corporate tax receipts to 2.26 trillion rupees and a 14 percent rise in income tax collections to 1.39 trillion rupees for FY09. The target for total receipts was 3.65 trillion rupees.

"There is a slowdown in revenue collection but we are hopeful of meeting the budget target of 3.65 trillion rupees by this fiscal year end," Moorthy told reporters after a conference.

 The growth in receipts until January were lower than the annual growth target of 17.6 percent, raising doubts that revenues may fall short of the budget target.

"The present growth rate in direct tax collection should not be disappointing as the budget estimates were made on the assumption of a 9 percent growth in the economy in 2008/09," said N.R. Bhanumurthy, an economist with Institute of Economic Growth.

Last week, the central bank said the Indian economy could grow at 7 percent or less in FY09, lower than 9 percent last year, while the fiscal deficit could widen to at least 5.9 percent of gross domestic product.

But Bhanumurthy said: "The slowdown in tax collection will put more pressure on government borrowing programme next fiscal."