14% shortfall likely in direct tax mop-up

Collection of direct tax for the just-concluded fiscal 2020 is expected at Rs 10.1 lakh crore, well short of the government’s most recent estimate of Rs 11.7 lakh crore, officials in the know said. The near-14% shortfall, or about Rs 1.6 lakh crore, from revised target set in the budget presented on February 1 is partly because of the ongoing lockdown, which is going to weigh on collections for the final fiscal quarter. The government had collected Rs 10.34 lakh crore in direct taxes in fiscal in direct taxes in fiscal 2019.

Though collections for the last couple of days of the financial year ended March 31are yet to be accounted for, the total would still be well short of the revised target. “Collections are on the lower side field formations are continuing to report numbers,” said an official, asking not to be named.

Though collections for the last couple of days of the financial year ended March 31are yet to be accounted for, the total would still be well short of the revised target. “Collections are on the lower side field formations are continuing to report numbers,” said an official, asking not to be named.

The government had in the February budget presentation lowered the direct-tax collection target for the year from the initially set Rs 13.35 lakh crore to Rs 11.7 lakh crore. Collection of corporate tax was projected at Rs 6.1 lakh crore in the revised estimates against Rs 7.6 lakh crore budgeted earlier. The revised target for personal income tax was Rs 5.56 lakh crore against the initial Rs 5.69 lakh crore.

“The shortfall is not entirely unexpected and reflects a general softening of economic activities as well as partly factors in the rate cut that was given out by the finance minister earlier in the financial year,” said Rohinton Sidhwa, a partner at Deloitte Haskins & Sells. The extra time given to settle tax disputes under the ‘Vivaad Se Vishwas’ scheme may have also dented collections. The government last week extended the deadline to avail of the scheme to June 30. Earlier, the deadline to settle tax disputes without paying any penalty of interest was March 31. A second official, meanwhile, said direct-tax collections were nearing the FY 2018-19 collections. “We’re closing in on the last financial year numbers, which is a good sign,” he added.

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