India’s Direct Tax Collections Drop By Over A Third In April-June
An individual Income Tax form for the 2018 tax year is arranged for a photograph. (Photographer: Daniel Acker/Bloomberg)

India’s Direct Tax Collections Drop By Over A Third In April-June

India’s direct tax collections dropped by over a third in the three months through June as economic activity froze during the Covid-19 lockdown.

Tax collected until June 15—the last date for first instalment of advance tax—stood at Rs 92,681 crore, a senior government official told BloombergQuint on the condition of anonymity. That compares with Rs 1.37 lakh crore collected in the same period last year. Total corporate tax collected during the period was Rs 36,033 crore, while personal income tax collection amounted to Rs 54,025 crore, the official said.

The government’s tax collections are expected to decline as the economy is set to contract for the first time in four decades as a result of the novel virus outbreak.

India has budgeted to collect Rs 13.19 lakh crore in direct taxes in the ongoing fiscal, which is expected to be revisited as a result of the economic impact of the pandemic. Even in the financial year ended March 2020, direct tax collections had dropped for the first time in two decades.

The shortfall in tax collections is primarily due to the impact of pandemic as businesses and individuals, facing a liquidity crunch, would have chosen to defer their tax payments, said Shailesh Kumar, a partner at Nangia & Co LLP.

Advance tax collections as on June 15, dropped over by around three-fourths year-on-year to nearly Rs 12,000 crore, the official said, indicating lower corporate profits.

Profit and revenue projections of companies have been cut as businesses were shut during the countrywide lockdown, Kumar from Nangia & Co. said, adding that a cut in their estimated profits would mean a reduction in their tax liability.

Total direct tax collections in the Delhi region saw a sharp decline of 43% year-on-year to Rs 12,982 crore, while tax collected in Chennai region plummeted 52% to Rs 5,826 crore. Kolkata recorded the highest decline of 74%, followed by Kochi’s 68%.

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