Direct Tax department sets target of Rs 13.19 lakh crore for FY21
The income-tax department has set its budgetary direct tax collection target for 2020-21 at Rs 13.19 lakh crore, 28 percent more than the actual collections in the year ended March 31.The department is heavily relying on the Vivad se Vishwas scheme, a direct tax dispute resolution mechanism, which it wasn’t able to roll up owing to the outbreak of the Covid-19 pandemic and the national lockdown that started on March 25, official’s privy to the development told ET.
Further, the country’s direct tax collections for FY20 stood at Rs 10.27 lakh crore, 12.2 percent short of the revised estimate of Rs 11.7 lakh crore mentioned in the Union budget for FY21 presented in February, and 8 percent lower than the previous year’s collections.
Officials, however, pointed out that the tax collection targets are based on the budget presented in February when there was no scare of the pandemic.
“It will be too early to say if the department will meet its target or not,” an official in the know told ET. “The targets completely depend how long the lockdown stretches and how the industries cope. A clear picture will emerge only after the second quarter.”
Another official said the department is pinning its hope on the tax resolution scheme even as several agencies have drastically cut their economic growth forecast for India and the rest of the world due to the Covid-19 pandemic.
“Owing to the extension of the lockdown, there is a strong possibility of the scheme being extended beyond June 30,” the person told ET. “Zones like Mumbai and Delhi are heavily relying on the scheme to meet their tax mopup target.”
The income-tax department in a communication sent to principal chief commissioners of I-T on Thursday said the budget target is based on “the revenue potential of the region, which is based on the weighted average growth rate of net collections of the last three years, giving highest weight to the immediately preceding year”.
“The above target should be further allocated down to various field units under your jurisdiction keeping in view the past performance and revenue potential of different charges,” it said.
However, going by last year’s figures, the tax collections targets don’t look promising.Direct tax collections for FY20 missed the revised estimate of Rs 11.7 lakh crore by Rs 1.42 lakh crore, and even fell 8 percent short of the Rs 11.17 lakh crore mopped up in FY19.
Moreover, Mumbai, which contributes 32 percent to overall tax collections, managed to mop up only Rs 3.2 lakh crore against its revised target of Rs 3.7 lakh crore, and a 11.8 percent decline from the previous year’s collection of Rs 3.63 lakh crore, officials cited earlier said.The Delhi circle’s tax collection declined 9 percent to Rs 1.46 lakh crore from the previous year, they said.
For FY21, the tax department has set the target for Mumbai at Rs 4.07 lakh crore with Rs 2.31 lakh crore as corporate taxes and Rs 1.62 lakh crore as personal income tax. For Delhi, the target has been set at Rs 1.89 lakh crore with RS 1.12 lakh crore from corporate taxes and Rs 76,957 crores from personal income tax.
Some experts are hopeful of the department meeting the tax targets.
“In the runup to next year’s revenue target, the tax department would have factored in collections from the VSV (Vivad se Vishwas) scheme, which would spill into the first quarter,” said RohintonSidhwa, a partner at Deloitte India.
“Further, as the economy recovers, there should be a muted growth that they would have factored in over the previous year as the economy limps back post Covid. Additionally, a new source of revenue on account of the equalisation levy would also come into play this year though it is not very clear what has been budgeted on account of this new tax,” Sidhwa said.