Direct tax collection in FY23 likely to top govt's Revised Estimates

Until Feb, net direct tax collection stood at Rs 13 trillion

Direct tax collection in 2022-23 is likely to exceed the government’s Revised Estimates (RE), potentially helping narrow the fiscal deficit.

Robust corporate tax collections and a likely recovery from pending tax demand have given the government confidence in actual revenue collections exceeding RE of Rs 16.5 trillion in the current fiscal year (2022-23, or FY23), according to government sources.

For FY23, revenue from direct tax, which includes individual and corporate taxes, has been revised upwards and is projected to grow by over 17 per cent to Rs 16.5 trillion, from Rs 14.08 trillion estimated earlier.

Until February, net direct tax collection (after adjusting for refunds) stood at Rs 13 trillion — about 80 per cent of RE for the full-year tax collection target for FY23. 

Taking into consideration growth in both corporate and individual taxes, in the first 10 months, the RE looks achievable, and may even exceed, said an official privy to the internal assessment.

Further clarity will, however, emerge after the fourth instalment of advance taxes due on March 15, he said.

Elaborating further, an official said that “corporate tax has been 15 per cent more than the same period last year, notwithstanding external headwinds”.

Being the last instalment of advance tax of the fiscal year, it is likely to shore up collection as several companies pay up entire dues that were not paid or partially paid in the first three instalments. Moreover, the enforcement efforts to recover outstanding tax demand further optimise revenue collection.

India’s direct gross tax collections, between April 1, 2022, and February 10, 2023, rose 24.09 per cent to Rs 15.67 trillion, according to official data.

Corporate tax grew at 19.33 per cent, while personal income-tax (I-T) saw 29.63 per cent growth. After adjustment of refunds, net growth in corporate tax collections stood at 15.84 per cent and in personal tax collection at 21.93 per cent, revealed data.

The government’s fiscal deficit touched 67.8 per cent of the full-year target at the end of January. In actual terms, fiscal deficit, or the gap between expenditure and revenue collection, during the April-January period was at Rs 11.9 trillion, according to data from the Controller General of Accounts.

For the full year of FY23, the government expects deficit at Rs 17.55 trillion, or 6.4 per cent of gross domestic product. However, economists see the direct tax mop-up RE as “slightly optimistic”.

“February-March FY23 growth target for direct tax revenues of 18.3 per cent is slightly optimistic, with growth having slowed to 8.2 per cent in October-January. This might lead to a small undershooting, relative to FY23 RE for gross tax revenue,” according to a report released by ICRA.

Notably, the Union Budget in February pegs tax revenue at Rs 33.6 trillion, which is 10.4 per cent higher than the Rs 30.4 trillion projected in the RE for FY23.

Of the total revenue receipts for 2023-24, the direct tax component is estimated at Rs 18.23 trillion. This includes corporation tax of Rs 9.2 trillion and I-T of Rs 9 trillion.