I-T dept asked to take urgent action as direct tax mop-up drops

Staring at a huge shortfall in direct tax collections, the Central Board of Direct Taxes (CBDT) has written to the heads of the regional field offices of the Income Tax Department to take all possible actions urgently to achieve the target for the current financial year 2018-19.

The direct tax mop-up has so far touched about 85% against the revised Budget target of Rs 12 lakh crore for the year. The collections indicate a declining trend with the growth touching a low of -6.9% last week.

Disappointed over the subdued tax collections, CBDT member Neena Kumar wrote a letter to all the Principal Chief Commissioners of Income Tax on Tuesday, asking them to "take all possible actions urgently, especially with respect to recovery of arrear and current demand, so as to achieve the targets for collection".

Meanwhile, the tax officials are working overtime to improve the collections, including nudging banks to deposit Tax Deduction at Source (TDS) well before the deadline. "We are hoping to collect another Rs 50,000-60,000 crore in the current week till March 31. We are banking on TDS payments and some last minute book entries. It, however, looks quite difficult to meet even the original target of Rs 11.50 lakh crore as per the Budget Estimates," said a senior official in the finance ministry.

The BE target for the current year was revised at Rs 12 lakh crore in the interim Budget. Experts had raised concerns calling the mop-up target "quite ambitious". It represented a growth of 20% over the previous year. For 2019-20, however, the target has been set at 15% growth in direct tax collection at Rs 13.80 lakh crore.

"It has been seen that as against budget collection target of Rs 12 lakh crore only 85.1% of the target of Rs 10.21 lakh crore has been collected as on March 23. The minor head-wise analysis indicates worsening trend of negative growth in regular collections at -6.9% against -5.2% in the last week. This is an alarming situation which needs immediate attention," Kumar said in the letter.

Raising concerns over the quality of demand raised by the I-T officials, Kumar said, "Regular assessment tax is benchmark of performance as it is based upon quality of demand raised which can further be converted into actual collections. Board has discussed strategies through various communications with you and it was expected that by this time your strategies would've succeeded resulting into improved collections. However, the figures of collection gave a different account."

The revenue department has asked the Department of Financial Services to write to all the banks to deposit the tax deducted from the interest on deposits, salaries for this quarter by March 31. While banks as well as companies can pay the TDS until April 30, they are being asked to deposit the TDS this month itself so that it can be booked in tax collection for the current financial year, thus improving the tax kitty.

According to experts, subdued collections will have an impact on the fiscal deficit even as the government tries to cover the gap between its total revenue and total expenditure through higher proceeds from disinvestment and non-tax route such as dividends.

"There will be a net impact on the fiscal deficit. It might turn out to be higher than revised Budget target of 3.4% of the Gross Domestic Product (GDP), unless the government makes up for the gap by reducing its expenditure along with the higher proceeds from disinvestment and dividends from public sector undertakings," said D K Srivastava, chief policy advisor at EY.

Target miss

• Tax officials are nudging banks to deposit Tax Deduction at Source (TDS) well before the deadline
• As against budget collection target of Rs 12 lakh  crore  only 85.1% of the target has been collected as on March 23