Direct tax revenue increased by 6.6% and corporate tax by barely 1%

The government may be talking about the increase in the number of tax returns until the August 31 deadline, but the data on direct tax collection available so far is unlikely to cause much noise.

Figures released by the Comptroller General of Accounts (CGA) on Friday revealed that direct tax revenue increased by only 6.6% between April and July of the current financial year compared to the budgetary target of 14, 4% for 2018-2019. The growth was the weakest compared to the corresponding periods of the last three years.

Corporate taxes, in particular, disappointed the Treasury. Those collections rose just 0.57%, the lowest in the first four months in at least seven years. Corporate taxes are expected to generate 10.15% additional revenue in the coffers at 6,210 billion rupees for the financial year 2019 against 5,637.45 billion rupees the previous year.

Personal income tax collections rose 11.3% in the April-July period, also a three-year low in the first four months. Personal income tax is expected to increase by 19.8% to 5,290 billion rupees in FY2019 from 4,412.55 billion rupees

one year ago.

Falling direct tax revenues were a key reason the government exceeded its full-year revenue deficit target by 6.3% in the first four months alone.

Experts said direct tax revenue was likely reduced by refunds. Otherwise, the companies’ strong first quarter results would not have generated so much revenue, they said.

“This (lower collection of direct taxes) was probably due to higher refunds,” said ICRA’s senior economist, Aditi Nayar.

Officials said the tax authorities are refunding 750 billion rupees in the first four months of the current financial year, half of what was refunded in the entire 2018 financial year.

Corporate results were quite robust in the first quarter of 2018-19. For example, overall sales of listed companies increased by 12%, which was higher than the prior year period.

Earlier, Finance Minister Arun Jaitley said advance tax collections for personal income tax increased by 44.1% and in the corporation tax category by 17, 4% in the first quarter of 2018-2019.

The subdued direct tax figures may thwart the theory of successful demonetization, but officials said the August figures would be much higher.

Tax returns filed this year primarily reflect tax paid in fiscal year 2018. The Income Tax Department said returns filed rose 70.86% to 54.2 million up to August 31, the deadline for filing declarations, compared to 31.7 million a year ago. The main push was seen in the category of salaried individuals and those benefiting from the flat tax scheme, which gives relief to small businesses that carry out tasks such as auditing accounts and keeping books of accounts.

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