India’s Direct Tax Collection Exceeds Revised Budget Target In FY21
India’s gross direct tax collection rose in a financial year that saw the coronavirus pandemic freeze economic activities and shut businesses.
Provisional estimates released by the Finance Ministry showed that the gross direct tax collection stood at Rs 12.06 lakh crore in 2020-21, a rise of 5% over the preceding fiscal.
Net direct tax collections, which adjust for tax refunds, however, dipped 10% over the year earlier to Rs 9.45 lakh crore. Still, that’s higher than the revised budget estimates of Rs 9.05 lakh crore.
Corporation tax revenue stood at Rs 4.57 lakh crore, a drop of around 18% over FY20.
Revenue through personal income tax, including security transaction tax, declined 1% to Rs 4.88 lakh crore in FY21.
“Despite an extremely challenging year, the advance tax collections for FY21 stand at Rs 4.95 lakh crore, which shows a growth of about 6.7% over the advance tax collections of the immediately preceding financial year of Rs 4.64 lakh crore,” the ministry said in a statement.
Tax refunds jumped almost 42% on a yearly basis to Rs 2.61 lakh crore, the provisional data showed.
Tax collection: Rs 12.06 lakh crore
Corporation tax: Rs 6.31 lakh crore
Personal income tax: Rs 5.75 lakh crore
Advance tax: Rs 4.95 lakh crore
Tax deducted at source (including central TDS): Rs 5.45 lakh crore
Self-assessment tax: Rs 1.07 lakh crore
Regular assessment tax: Rs 42,372 crore
Dividend distribution tax: Rs 13,237 crore
Tax under minor heads: Rs 2,612 crore
The economy is slowly recovering and tax collection numbers are on expected lines, according to Devendra Kumar Pant, chief economist at India Ratings and Research. “This, along with indirect tax collections for FY21, suggests that fiscal deficit in FY21 may be lower than the revised estimate, provided there is no slippage on expenditure side. This is further corroborated by the central government cancelling last scheduled government borrowing in FY21,” Pant said.
Aditi Nayar, chief economist at ICRA Ltd., said the collections appear to have contracted by a modest 3.5% in March 2021, suggesting the back-ended release of refunds.
“Regardless, with direct and indirect tax collections exceeding the revised estimates, we expect the fiscal deficit to be limited to Rs 17.0-17.2 lakh crore for the just-concluded fiscal. With the contraction in direct taxes in FY21 limited to 10%, the growth target for FY22 as per the budget estimates is now around 17%, only modestly higher than the projected nominal GDP growth,” Nayar said.