If advance tax data is any indicator of corporate profits, then the fourth quarter may be a mixed one for India Inc.
Only a few companies, such as Reliance Industries (RIL), Infosys, TCS and Tata Motors, have posted substantially higher payments compared with the same quarter last fiscal.
The mop-up, thus, throws up a key question: will the tax department meet the stiff collection targets set by the finance ministry?
Mridul Saggar, chief economist, Kotak Securities, said indeed, the government may fall short of the revised estimate for tax collections, “but its not that worrying”.
Shubhada Rao, economist, Yes Bank, and Indranil Pan, chief economist, Kotak Mahindra Bank, concur.
“Advance tax payments falling short will not have much of an implication on the government’s borrowings either,” Pan said.
According to sources in the income tax department, advance tax collections from the top 100 tax-payers have shown a growth of just over 19% year on year compared with the internal target of close to 25%.
The government had revised estimate for direct tax collections in 2009-10 (April-March) to Rs 387,000 crore, while the actual collection may remain between Rs 370,000 crore -Rs 375,000 crore, according to early indications, the sources said.
Meantime, RIL’s advance tax payment almost doubled to Rs 770 crores, sources at software majors Infosys and TCS said their robust advance tax numbers reflected growing business confidence and higher profitability in coming quarters.
But the banking sector, which has unfailingly led the advance tax chart for the last many quarters, has disappointed this time round.
Except ICICI Bank, most other banks’ numbers were more or less similar to last year’s figures.
In the case of foreign banks, advance tax payments were 50-60% lower than the previous figures.
The cement sector posted marginally better numbers, while housing finance leader HDFC’s payment remains unchanged.
If there was a comeback kid of the year award, it would certainly go to Tata Motors, which paid Rs 115 crore this quarter as against no payment last year, when it has hobbled by poor financials.
Portfolio manager Jaideep Merchant of Janak Merchant Securities found the data satisfactory. “Based on these estimates we don’t expect any major changes in FY2010 earnings estimates for the Sensex,” he said.
Corporates have to pay 25% of their annual estimated tax liability in advance in January-March. In April-September, they pay 15% of estimated tax burden for the year as advance tax, while in July-September and October-December they pay 30% each.
Arun Giri is with BloombergUTV. Saket Sundria of NW18also
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