Direct tax mop up tendency indicates exceeding GoI’s revenue targets

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“There is a tide in the affairs of direct taxes, which, taken at the flood, leads on to fortune”. If Union finance minister Nirmala Sitharaman twists what Shakespeare wrote in Julius Caeser, one can’t really fault her, for direct tax revenue post refunds has swelled to 20.66% in the period between April 1 and December 17 compared to the same period in 2022 to reach Rs 11.36 lakh crore, it has been reported.

The Business Standard has reported quoting data from the Central Board of Direct Taxes that direct tax receipts included in its fold corporation tax and personal income tax. While personal income tax and securities transaction tax (STT) were recorded at Rs 16.73 lakh crore, Rs 6.95 lakh crore was obtained under corporation tax.

The corporate tax mop-up was recorded at 75.30% of the budget estimate while personal income tax revenue collected constituted 74.72% of the budgeted full-year figure Rs 9 lakh crore.

If one considers the direct tax revenues pre-refund, the collection works out to Rs 15.96 lakh crore and a rise of 17.01% compared to the same period of FY23. Till December 4 2023, an amount of Rs 2.25 lakh crore was issued for refund by the government.

The collections of corporation tax, personal income tax and total direct tax as a percentage of the budget estimate stood at 75.3%, 74.72 and 75.15 respectively.

The figures portrayed two things, both equally important for sound economic administration. These are economic recovery and enhanced administrative skills of the income tax department. Officials indicated with more than three-fourths of the annual target already pocketed and about three months and a half left for the year, the government will probably exceed the year’s target.

The finance minister had projected 11.57% rise in the mop-up of direct taxes in FY24.

While direct tax collection has gladdened the hearts of the finance ministry mandarins, indirect taxes led by GST collections have complemented the scenario of tax buoyancy. Most important, it would allow the government to keep fiscal deficit with the projected 5.9% of GDP. In fact, both the direct and GST collections have allowed the government to survive poor performance in disinvestment proceeds, excise collections and a higher subsidy bill than that projected during the presentation of the budget.

The figures for various other heads in the revenue board were as follows: TDS (Tax deducted at source) Rs 7.71 lakh crore, self-assessment tax at Rs 1.49 lakh crore and regular assessment tax of Rs 0.36 lakh crore. An amount of Rs 14,455 crore was collected as taxes under other minor heads was 14,455 crore between April 1 and December 17, 2023.

The tax collections are in tandem with the growth of the economy at 7.6% in Q2 (July-September) of FY24, which beat the expectations of many. It followed a strong display of 7.8% growth in Q! (April-June).

The Monetary Policy Committee of the Reserve Bank of India also improved GDP growth rate projections to 7% from the 6.5% it said earlier for FY24.