Advance tax collection may go up 15-20% in fourth quarter

Advance tax collections for the January to March quarter may see a rise of 15-20 per cent against the total collections for the corresponding period, last year.

According to preliminary indications, the automobile and pharmaceutical sectors are expected to lead the list. However, banks, especially public sector and foreign banks, and oil marketing companies will be laggards due to their indifferent performance.

Tax officials said the dividend distribution tax (DDT) paid by mutual funds for the current financial year has also not been satisfactory. But officials added that the March quarter may see some revival in DDT payments.

Meanwhile, companies have recently been notified to adjust the Fringe Benefit Tax (FBT) amount paid in advance tax installment in the fourth installment, following the decision to withdraw FBT. “While this will help the companies in adjusting their tax liability for the current year, it means that the government will get less money to that extent,” said a senior CBDT official.

According to projections made by the department, based on its discussion with companies, State Bank of India is expected to pay around Rs 1,600 crore for the fourth quarter as against Rs 1,038 crore last year and Reliance Industries Ltd is expected to pay a total tax of Rs 770 crore for the fourth quarter as against Rs 365 crore a year ago.

Tata Steel is likely to pay Rs 720 crore (from Rs 420 crore last year). Among Tata group of companies, Tata Motors, which paid zero tax in the fourth quarter of last year due to losses, is expected to pay a good amount following the revival of the sector. Similarly, Bajaj Auto is expected to pay around Rs 160 crore (from Rs 60 crore last year).

The large tax payer unit, however, is witnessing satisfactory collections and the total amount contributed by these units are expected to go up from Rs 6,383 crore in 2009-10 to Rs 8,705 crore in 2010-11. The March quarter collection may go up from Rs 1484 crore to Rs 2070 crore.

Union Bank of India is likely to pay Rs 172 crore (Rs 153 crore), while Bank of Baroda might pay Rs 300 crore (Rs 280 crore). Bank of India is expected to make a total tax payment of around Rs 700 crore as against Rs 1,200 crore paid in the same period last year. The Rs 602 crore that has already been paid till the December quarter is being considered a pittance, said sources. IDBI bank might pay around Rs 187 crore (Rs 63 crore).

Oil marketing companies have also given assurances to make payments following the cash subsidy from the government, since oil bonds may not be issued, said official sources. A company is expected to pay 25 per cent of the total taxes in each quarter.

Other companies, which are expected to make good contributions, are a host of sugar companies, Lupin and HDFC Bank.

Officials said bank profits have suffered due to an erosion of the market value of investments in government securities due to the higher supply of government securities in the new financial year. Banks are exiting government securities investments to create room for new investments. As a consequence, there is heavy selling and subsequently a decline in the value of securities.

In a massive drive to boost advance tax collections, the tax department has persuaded companies to pay full tax in this quarter. This means if the total tax to be paid on income is higher than the four installments of advance taxes, these companies should pay the entire tax in this quarter. Usually, the tax is paid when returns are filed in the following financial year.

Advance tax is a staggered mode of payment of total taxes by companies which is paid in four quarterly installments.