Aided by better compliance, lower refunds and a gradual revival of economic activity, the Center collected Rs 13.63 trillion in direct taxes on March 16 in 2021-22, an increase of Rs 1.13 trillion or 9% from the revised estimate (RE) for the year. With the robust restructuring, the government could appropriate a slightly higher amount than it could have gotten from Life Insurance Corporation’s IPO, which has now been postponed until next fiscal year.

The higher-than-expected tax revenues in FY22 also grossly underestimate the relevant budget estimate (BE) for FY23. With two weeks to go, direct tax receipts, excluding refunds, could approach Rs 14 trillion in the current fiscal year, which is strikingly distant from the FY23 BE of Rs 14.2 trillion.

With net additional revenue of Rs 20,000 crore expected as Goods and Services Tax (GST) receipts and a nice amount to come in as additional customs revenue given the surge in import value, total net tax revenue could exceed FY22. the respective RE of Rs 17.6 trillion by a tidy Rs 1 trillion.

The budget for FY23 assumes nominal GDP growth of 11.1% for the year. Independent estimates say growth could be slightly higher due to high inflation, even though real GDP expansion could turn out to be less than the 8-8.5% forecast by the Economic Survey. This means that the buoyancy needed to achieve the target net tax revenue (BE) will be much lower than the budget estimate of 0.9.

“The record direct tax collection in FY22 is due to reforms over time, increased compliance and awareness among taxpayers to pay taxes on time. We also expect tax collections to be robust and exceed target next fiscal year,” JB Mohapatra, chairman of the Central Board of Direct Taxes, told FE.

Direct tax prepayments from corporations, LLPs and individuals increased by more than 30% year-on-year to about Rs 1.8 trillion in Q4FY22, even as a favorable base effect waned. Cumulative withholding taxes to the March quarter of FY22 were Rs 6.62 trillion (as at March 16), an increase of about 41% from FY21 and 51% from FY20, an official said.

As of March 16 of the current fiscal year, direct tax collections (after refunds) were Rs 13.63 trillion, an increase of approximately 48% year-on-year, an increase of 43% over the same period in FY20 and 35% over the corresponding period in FY19.

Gross direct tax collection (before repayments) was Rs 15.5 trillion on March 16, up 38% year-on-year and 37% compared to the same period in FY20.

Gross collections up to March 16 included corporate tax of Rs 8.37 trillion (up 37% year-on-year) and personal income tax including tax on securities transactions (STT) of Rs 7.1 trillion (up 40%). Of the small poll collections on March 16, the tax withheld at source was Rs 6.86 trillion (38%); self-assessment tax of Rs 1.34 trillion (35%); regular assessment tax of Rs 55,249 crore (47%); STT at Rs 23,190 crore (37%) and Equalization Charge at Rs 3,444 crore (94%).

Refunds of 1.87 trillion rupees have been issued so far in the current fiscal year.

This post FY23 tax revenue target looks simple: Direct tax revenues surpass revised estimate by Rs 1.1 trillion

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