Advance tax collections for the second quarter of the current financial year (2009-10) have shown robust growth of 35 to 40 per cent across industries, reinforcing the government’s hopes of a sooner-than-expected recovery.
Although total tax collections are yet to be officially collated, Mumbai’s large tax payer unit has collected Rs 2,628 crore in the second quarter against Rs 895 crore in the last quarter.
The second quarter is significant, since companies or banks pay almost 45 per cent of the total annual tax payable. The first quarter accounts for 15 per cent.
“Second quarter collections give a rough indication to the Central Board of Direct Taxes whether or not the tax departments will be able to meet the annual target for the financial year, which is definitely good for this year,” said an official source.
The target for direct tax collections for 2009-10 has been fixed at Rs 3,70,000 crore, roughly 10 per cent higher than Rs 3,38,212 crore last year.
Most industries, especially automobile and infrastructure companies like Tata Motors, L&T and Reliance Industries, have done well.
The income-tax department, however, thinks even if all the banks have reported a quarter-on-quarter growth, their total tax payout has fallen if the advances are compared with the first quarter.
For instance, India’s largest bank, State Bank of India, saw second quarter advance taxes at Rs 1,838 crore, 78 per cent more than Rs 1,068 crore paid in the first quarter If total tax payment projections are calculated on the basis of the first quarter payout, which is typically 15 per cent of the annual pay-out, annual tax works out to Rs 7,120 crore (that is, Rs 1,068 crore/0.15).
Add in second quarter collections, which comes to Rs 2,906 crore, and the annual payout falls more than Rs 600 crore. Assuming the second quarter accounts for 45 per cent of annual tax collections, the pay-out for 2009-10 works out to Rs 6,457 crore (that is, Rs 2,906/0.45).