The growth in advance tax collections dropped to a little over 10% in the September quarter from 33% in the previous quarter, reflecting a normalisation of the base, an overall moderation in corporate earnings and easing inflation.
Government officials also cited a 36% growth in collections via the tax deducted at source (TDS) route for the lower growth in advance taxes.
The Centre’s overall net (post-refunds) direct tax collections rose 23% on year to Rs 7 trillion till September 17, the finance ministry said in a statement on Sunday.
Advance tax collections stood at Rs 2.95 trillion as on September 17, up 17% growth on year. The mop-up was at Rs 1.01 trillion in the June quarter, up a third on year. The September installment of the tax, therefore, is seen at Rs 1.94 trillion, up 10.2% on year.
Advance taxes are paid by companies, LLPs and individuals in four installments in a financial year: 15% by June 15, 45% by September 15, 75% by December and 100% by March 15.
Revenue secretary Tarun Bajaj said advance taxes for Q2FY23 were still trickling in. “It is not over as yet. Also, we are now collecting a larger portion of tax by way of TDS, which grew 36%. So, that gets adjusted in instalments of advance tax. One can’t look at advance taxes in isolation,” Bajaj told FE.
He added that the overall gross tax (before refund) growth was 30%-plus till September 17 and the refunds have grown by over 83%.
“Since refunds have been front-loaded, I expect that this year’s net direct tax collections growth in the remaining period will catch up with the gross (collection) growth. If we close the year with an increase in net growth of over 30%, that would be remarkable as it will be upon a solid growth of 49% of last year. It would mean direct tax figures almost doubling in 2 years. We will, however, wait-and-watch,” Bajaj added.
If net direct tax collections grow by 30%, it could fetch Rs 4.25 trillion additional revenue (before devolution). Post 41% devolution, the Centre could garner around Rs 2.5 trillion, offsetting a similar amount of additional subsidy expenditures on food, fertilisers and fuels, in FY23.
Net direct tax collections so far till September 17 included corporation tax at `3.68 trillion and the personal income tax, including securities transaction tax, at Rs 3.3 trillion.
There has been a remarkable increase in the speed of processing of income tax returns filed during the current fiscal, with almost 93% of the duly verified ITRs having been processed till September 17, the ministry said.
Refunds amounting to Rs 1.36 trillion have been issued so far in the current fiscal against Rs 74,140 crore in the year-ago period, the ministry said. Gross direct tax collections grew 30% to Rs 8.36 trillion till September 17 of FY23.
“While TDS collections may be higher due to better compliance, the advance tax collections may be impacted by a lower growth in both nominal and real gross domestic product in the second quarter of the current fiscal compared to the first quarter,” India Ratings chief economist DK Pant said.