In what could be a relief for the country’s economic condition, net direct taxes increased 18.2% for the period between April and December 2017 compared to a year ago. Direct taxes collected for the nine-month period of the current fiscal year surged to Rs.6.56 lakh crore (trillion). This is a much needed relief for the government considering the fiscal deficit target for the upcoming budget.
Direct tax represents a combination of various taxes including income tax, property tax, wealth tax, corporation tax, etc. Gross tax collection, which includes the amount of money returned as refunds, increased about 12.6% and reached Rs.7.68 lakh crore for the same period. Refunds worth Rs.1.12 lakh crore were provided during the nine-month period between April and December.
Personal income tax is the significant contributor of this direct tax growth. Of the Rs.6.56 lakh crore net direct taxes collected during the nine-month period, the share of income tax amounted to 67% of the total money and this represents a significant growth compared to the last four years. Advance tax represents nearly half of the total direct taxes. About Rs.3.18 lakh crore has been collected as advance tax during this period. The rise in income taxes and corporate tax is an indicator that corporate performance has been good for the last few months.
The estimate for the upcoming budget is around Rs.9.8 lakh crore. Direct taxes collected during the nine-month period represents about 67% of this budget estimate. This means that the government has a great chance to narrow the fiscal deficit of the economy.
The significant growth in direct taxes has been attributed to the implementation of GST and demonetisation. Moreover, the Central Board of Direct Taxes has instructed officers to pursue tax arrears. Higher tax collection could be a result of that initiative. While there is a significant growth in direct taxes, indirect tax collection is likely to be lower this fiscal year.