The direct tax collection for 2009-10 fell short of target for the second time in a row due to lower payment by foreign banks and fewer mergers and acquisitions, adding to the strain on government finances.

The collection stood at Rs 330,000 crore, Rs 70,000 crore lower than the revised target, on Thursday, three days after the last date of the advance tax payment.

However, the Central Board of Direct Taxes, the apex body of the countrys tax administration, expects the collection to go up marginally during the rest of this month. CBDT chairman SSN Moorthy told ET: Tax payments keep coming till March 31. In some cases, banks take a few days to clear the payments.

The shortfall in direct tax revenue is expected to widen the fiscal deficit, which is projected at 5.7% of GDP for FY10. This could delay the governments fiscal consolidation effort.

A senior income-tax official said the tax payment by foreign banks declined by 60% although the tax outgo of domestic banks remained flat. Banks, domestic and foreign, contribute one-third of the total corporate tax collection.

Although payment might trickle in the rest of the month, it would not be sufficient to meet the shortfall, said an I-T official familiar with tax collection, who did not wish to be named. The shortfall this year may, however, be lower than the previous year, the official said.

The authorities have revised the original target of Rs 370,000 crore to Rs 400,000 crore this year on expectation that the economic recovery would attract more tax collection.

The tax regime has also worked overtime to plug leakage this year. Chief commissioners in all circles have asked companies to avoid delayed payment tactics, in which the firm owners partially pay tax by March 15 and pay the rest as self-assessment tax till next year.