Advance tax: 80% drop in first instalment collections from corporate assesses

Advance Income Tax collection from corporate in the first installment is down by almost 80 per cent. Even from the individual, it has come down by nearly 64 per cent.

The due date for the first instalment was June 15 The trend in the advance tax is one of the indicators of economic activities.

According to sources, initial indication shows collection from corporate as the first instalment was only little over ₹8,200 crore as against nearly ₹40,000 crore as the first instalment during last fiscal i.e. FY 2019-20. In terms of personal income tax, the amount was little over ₹3,400 crore, which is almost one-third of the first instalment of last fiscal.

One oblivious reason for the shortfall is lockdown which came into effect from March 25, and it resulted in over two-thirds of economic activities coming to a standstill. In-fact deflation based on wholesale price index (WPI) released on June 15 and financial results of April-June quarter gave a clear hint that balance sheet is really in bad shape and now advance tax number proved that.

Advance tax is required to be paid during a financial year in every case where the amount of such tax payable by the assessee during that year, is ₹10,000 or more. All such assesses, corporate or individual need to pay in four instalments during each financial year. First due date is June 15 when at least 15 per cent of the total estimated tax to be paid. Second due date is September 15 when 30 per cent of total estimated tax required to be paid. Another 30 per cent of tax due to be paid by December 15 while remaining amount is required to be deposited by March 31. Deferment of advance tax will attract interest at the rate of 1 per cent per month on the amount of shortfall from 15/45/75 per cent, as the case may be, of the tax due on the returned income.

The Government has set a target of ₹13.91 lakh crore through direct taxes (Corporate Tax and Personal Income Tax). However, as sources informed, the gross collection is down by nearly 30 per cent as on date. Even factoring lower refund, the net collection is down by 32 per cent. Though economic activities have improved but considering much less demand and consequent lesser industrial activity, direct tax collection target is becoming very difficult.

However, the Government is expecting some support from Vivad se Viswas Scheme. In the current times, a large number of disputes related to direct taxes are pending at various levels of adjudication from Commissioner (Appeals) level to Supreme Court. These tax disputes consume a large part of resources both on the part of Government as well as taxpayers and also deprive the Government of the timely collection of revenue. As on November 30, 2019, about 4.83 lakh appeals were pending at various levels involving tax arrears to the tune of about ₹9.32-lakh crore. The Centre hopes the new scheme will bring down the number of pending cases and result in some portion of the locked revenue being realised.

Table