Direct tax receipts grow a robust 19.5% y-o-y

The Centre’s direct tax collections, net of refunds, grew a robust 19.55% year-on-year till January 10. The government seems on track to exceed its conservative full-year target by a wide margin of over Rs 2 trillion.

Data released by the finance ministry on Wednesday revealed that direct tax collections were Rs 12.31 trillion by January 10, amounting to 86.68% of the Budget estimates for the whole year. “The provisional figures of direct tax collections up to January 10 continue to register steady growth,” the ministry said in a statement.

The pace of growth has, however, slowed marginally from a near 26% growth, for the period up to November 10. Collections up to December 17, 2022, were up 19.81% y-o-y.

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Pre-refunds collections till January 10 shot up by 24.58% y-o-y to Rs14.71 trillion. The government has set a gross direct tax collection target of `14.2 trillion for the fiscal. Of course, the Centre nets only 58% of the taxes collected in the divisible pool, which includes direct and indirect taxes except cesses and surcharges.

After adjustment of refunds, the net growth in corporate income tax collections was 18.33% and that in personal income tax collections was 21.64% in the period. Inclusive of securities transaction tax, the personal income tax mop-up grew 20.97% in the period under review.

Refunds amounting to Rs 2.40 trillion have been issued between April 1, 2022, and January 10, 2023, which are 58.74% higher than refunds issued a year ago.

Higher tax revenue as well as higher-than-estimated nominal GDP growth of 15.4% in FY23 is expected to help the Centre meet, if not better, its fiscal deficit target of 6.4% for the fiscal.

Aditi Nayar, chief economist, Icra, said the agency expects direct taxes to exceed the BE by Rs 2.2 trillion on a gross basis. “We expect a healthy overshoot in direct taxes and central goods and services tax to absorb a considerable part of the additional expenditure. The fiscal deficit may exceed the budgeted level by `80,000 crore but a higher nominal GDP will restrict it to 6.4% of GDP,” she said.