Tightening its belts, the income tax department has chalked out an intensive strategy on collections in the backdrop of slowing economy. Though, direct tax collections have been buoyant so far, the department is not taking any chances as the deadline for payment of the third installment of advance tax is drawing near.A meeting of senior level field officials of income tax department on Wednesday, that was called specially at the behest of revenue secretary PV Bhide, took stock of the state of collections and the strategy for the rest of fiscal.
After estimating their income in a financial year, companies have to pay tax on their income in advance to the government in four installments. The first installment is to be paid by June 15, second by September 15, third by December 15 and last by March 15 in a financial year. Companies have to pay a cumulative of 75% of total advance tax by December 15. Advance tax collections act as a good indicator of industry’s performance.
As a part of the strategy, the income tax department field officials will carry out special monitoring of advance tax payments by corporates. The idea is to ensure that companies do not hold back advance tax payment when interest rates are high, as the usual tendency is, a finance ministry official said. If a company defers its advance tax liability, it has to pay a penal interest of 1.5% per month. Special attention would be paid on using intelligence information that flows to the department from various sources like annual information return to ensure there is no evasion.
Deliberations also took into account growth in direct tax collections in the month of October which stood at 11% at Rs 19,708 crore as against Rs 17,809 crore in October, 2007. However, since cumulative growth is still 29.52% in the first seven months of the fiscal, the department wants to keep a special tab on December tax collections.
The targeted growth rate for direct tax collections is 25.6% in the current fiscal. The government had revised the budget estimate of Rs 3,65,000 crore to a little less than Rs 4,00,000 crore. To achieve the initial budget estimate, direct taxes needed to grow by 16.07%. Any slippage in direct tax growth is bound to put pressure on the government’s fiscal situation.