Advance Corporate Tax Collection Drops Over 10% in April-March FY20

The collection of withholding tax paid by companies fell by more than 10% between April and March 15, 2019-2020. This drop, after the end of the deadline for the fourth installment on March 15, could result in a shortfall of at least Rs 35,000 crore in total direct tax revenue for the current financial year, tax officials have said at the fluent.

Even the tax settlement resolution program, Vivaad Se Vishwas, may not help bail out the coffers due to the Covid-19 pandemic which has halted all outreach programs by the income tax department, said a manager.

Total direct tax revenue fell by more than 5% to 9.57 trillion rupees through March 18 against the revised target of 11.7 trillion rupees for the current financial year, leaving a gap of 2.13 trillion rupees.

In addition, advance tax collection comprising corporations and individuals declined by more than 5% to Rs 3.55 trillion from April to March of FY2020. stood at 2.67 trillion rupees until March 14, down 12.4% from 3.05 trillion rupees a year ago. Withholding tax on personal income recorded a marginal increase of just over 3% until March 14.

The Center was optimistic about achieving the direct tax collection target after revising it down to 11.7 trillion rupees from 13.35 trillion rupees for this financial year. The government has revised the budget estimate due to the reduction in corporate tax rates which is expected to hit the Treasury by Rs 1.45 trillion in the current financial year.

Source: Department of Income Tax

Sources estimated that the new resolution system would likely add Rs 1-1.5 trillion to the direct tax collection account. Vivaad Se Vishwas, which was notified on March 17, does not see favorable results due to the reluctance of large taxpayers, especially state-owned companies, where thousands of crores have been tied up. Additionally, Mumbai, the top harvester, saw negative growth of 1.04% between April 1 and March 14. The city raised Rs 2.62 trillion against the revised target of Rs 3.78 trillion during the period.

“Globally, revenue mobilization is facing the heat. We have not yet done a concrete analysis of the slowdown, but it is difficult to say that it is only because of the rate cuts. Other factors also played a significant role,” the official quoted above said.

About 45 percent of the collection comes from withholding tax and the rest from TDS (withholding tax), among others. Collection of TDS, on the other hand, recorded a growth of 8.3% to Rs 4.83 trillion between April and March 14. Self-assessment tax (tax on balance after TDS) also showed good numbers, with total collection of over Rs 83,000 crore during the period, up 5.2%.

Taxable persons falling within the scope of the advance payment of tax are required to pay 15% of the tax payable calculated in the first quarter, 25% in the second and the remainder in equal installments during the remaining two quarters.

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