Advance tax mop-up rises only 6% in Q4

Corporate tax payment growth in March quarter is typically in double digits

This report has been revised to incorporate a clarification from State Bank of India  
India’s top 100 companies paid six per cent more advance tax in the March quarter than they did a quarter ago. 

Of these, 43 companies contributed Rs 29,239 crore, according to the income tax (I-T) data, which is a reflection of corporate India’s financial health.

The advance tax paid by the same 43 companies in the December quarter was Rs 27,584 crore. The March 2017 figures are around eight per cent higher than those of March 2016.

“Advance tax collections from the top companies were discouraging. Typically, we see a growth rate of over 10 per cent in the March quarter,” said a tax official.

In the December quarter, advance tax payment for the top 43 companies grew 10.12 per cent over the September quarter.

The single-digit growth in the March quarter was mostly driven by advance tax paid by public sector undertakings like State Bank of India (SBI), Life Insurance Corporation (LIC) and Indian Oil. Private companies reported either a decline or a small single-digit increase in their tax outgo.

According to sources, ICICI Bank and Reliance Industries paid 37 per cent and 36 per cent less advance tax, respectively, in the March quarter than they did in the December quarter. 

Tata Consultancy Services and Tata Steel paid two per cent and 16 per cent less, respectively.

Reliance Industries paid Rs 1,664 crore advance tax in March against Rs 2,600 crore in the preceding quarter and TCS Rs 1,509 crore against Rs 1,540 crore. 

SBI paid Rs 1,621 crore advance tax this quarter which was 4.3 per cent higher than that in the December quarter. Bank of India’s advance tax payment was up 68 per cent to Rs 588 crore. 

Indian Oil Corporation saw its advance tax almost doubling sequentially.

“The majority of the PSU lenders have shown good numbers, which indicates that liquidity is high in the banking system. This, perhaps, is due to an increase in financial savings that took place after demonetisation,” said Rahul Garg, partner,  direct tax, PwC.

Most large companies have not made their advance tax numbers public this time.  

Tax experts said the March quarter saw the lingering impact of the note ban. “The pattern in advance tax numbers shows that the fourth quarter is depressed majorly due to demonetisation,” Garg said.

Direct tax collections at the end of the February stood at Rs 6.13 lakh crore, or 72.4 per cent of the fiscal year’s target of Rs 8.47 lakh crore. The Mumbai circle, which contributes over 33 per cent of the direct tax collection, has collected Rs 1.88 lakh crore, or 69.6 per cent, against a target of Rs 2.7 lakh crore.

HDFC Bank’s numbers show a 19 per cent growth compared to the previous quarter, Hindustan Unilever a 5.5 per cent rise, Bajaj Auto a 22 per cent decline and UltraTech’s outgo remained unchanged.

In line with the Income Tax Act, companies are required to pay 15 per cent of their total advance tax on June 15, followed by 30 per cent, 30 per cent and 25 per cent in the next three quarters, respectively.