Personal income tax saw contraction shrink to 13 per cent by November from 22 per cent seen up to September, on the back of lower issuance of refunds and improvement in economic conditions.
Contraction in direct tax collection narrowed significantly in November on the back of considerable improvement in personal income tax and corporation tax mop up, pointing at further improvement in economic activity and jobs availability in the third quarter of the fiscal year.
Direct tax collections, net of refunds, declined by 25 per cent by end of November, an improvement from the 31.4 per cent decline in September.
Improved collections will come as a respite for the Centre as it faces spending pressure to spur economic activity.
Personal income tax saw contraction shrink to 13 per cent by November from 22 per cent seen up to September, on the back of lower issuance of refunds and improvement in economic conditions.
Decline in corporation tax collection eased slightly to 36 per cent by November, from 40 per cent by September.
The impact of base effect on account of corporation tax reduction in September last year will be largely visible in December when the third installment of advance tax collections come in by the middle of the month.
Net direct tax collection stood at Rs 4.09 trillion as on November 30, down from Rs 5.44 trillion in the same period last year, according to provisional numbers shared by a government official.
The mop up is merely 31 per cent of the target of Rs 13.19 trillion estimated in the Budget for 2020-21.
The refunds are 8 per cent lower at Rs 1.38 trillion compared Rs 1.5 trillion in the same period last year.
“There is significant improvement in collections with other high frequency economic indicators pointing to a recovery.
"The impact of the base effect of last year’s corporation tax reduction will be visible in the third quarter advance tax collections due by the 15 of this month.
"We see further improvement in tax deduction at source as jobs revive,” said a government official.
Personal income tax grew by a stellar 16.6 per cent in October and by 2.6 per cent in September.
The PIT, net of refunds, stood at Rs 2.23 trillion by the end of November, compared with Rs 2.55 trillion last year. However, refunds were 29 per cent lower at Rs 35,000 crore, compared with Rs 49,000 crore last year.
The decline in corporation tax narrowed to 11.6 per cent in November and 5 per cent in October compared to a near 40 per cent cumulative contraction seen in the April-September period.
The corporation tax collection stood at Rs 1.86 trillion in the April-November period, 36 per cent lower than Rs 2.89 trillion in the corresponding period of last year.
The government had announced a tax rate cut from 25-30 per cent to 22 per cent last September for existing companies that do not avail of any exemptions, and 15 per cent for new companies, besides a reduction in minimum alternate tax from 18.5 per cent to 15 per cent.
Photograph: PTI Photo
