Taxmen will keep a close watch on corporate advance tax payments as the income-tax department turns the heat on them to shore up direct tax collections that have grown in low single digits in the first eight months of the current financial year. The third quarter advance tax payments are crucial as they largely form the basis of all significant changes in tax laws in the Budget, presented usually on the last working day of February every year.
The Central Board of Direct Taxes, the apex direct tax body, is keeping a tab on advance tax payments by companies and has asked its officials to scrutinise the second quarter results of top 500 corporate taxpayers, an income-tax department official told.
“The board has sent out a letter directing its officers to keep a close watch on advance tax payments,” the official said.
The exercise is aimed at ensuring that companies do not defer tax payments. The official said there is a tendency among companies to defer tax payments to show increased revenues and pay the tax due later with a penalty – 1% interest for every month of delay.
The last date for payment of the third installment of advance tax is December 15. Advance tax is paid in four installments in June, September, December and March, and is based on taxpayers’ projected income, giving an indication of industry’s performance in coming months.
Corporate advance tax payments grew by 14.7% in the second quarter, after declining by 3.7% in June.
With the economy showing clear signs of recovery, the government is hopeful advance tax payments will help it meet the shortfall in direct tax collections. Direct tax collections stood at Rs 1,83,822 crore in April-November 2009. Collections have to grow at a rate of 18% for the rest of the year for the revised target of Rs 4 lakh crore to be achieved. But the CBDT is now looking at a more realistic number of Rs 3.80 lakh crore in view of the subdued growth.
There are 1,146 cases with CBDT that have an outstanding demand of more than Rs 10 crore, while the total outstanding tax demand is Rs 1,72,781 crore as on September 30, 2009.