Advance tax collection surges 33 pc to Rs 1.41 trillion in Dec. quarter

Advance tax paid by companies in the December quarter has risen by 50 per cent compared to the corresponding period last year. This indicates a sharp revival in direct tax mop-up. It also indicates that the optimism among corporate houses about their earnings as the economy gradually recovers from the pandemic-induced shock.

The robust revenue collection reinforces hope of a good economic performance in the third quarter of financial year 2020-21 (Q3FY21) after the surprising pickup seen in Q2.

At Rs 1.41 trillion, overall advance tax collection, including corporation and personal income tax, rose by 33 per cent in Q3.

In the April-December period, advance tax mop up stood at Rs 2.99 trillion, a six per cent fall year-on-year (YoY) as compared to a 25 per cent contraction seen after the second instalment in September.

This also helped narrow the contraction in net direct taxes to 13 per cent as on December 16 as compared to a 25 per cent decline seen as on December 1.

Direct tax collection, net of refunds stood at Rs 5.89 trillion as compared with Rs 6.75 trillion a year ago. The collection is just 45 per cent of the target of Rs 13.19 trillion estimated in the Budget for 2020-21. 

Gross collections are down 12 per cent to Rs 7.34 trillion and refunds are lower by nine per cent to Rs 1.45 trillion as of December 16. Advance tax is paid in four installments — 15 per cent by June 15, another instalment by September 15 (30 per cent), third by December 15 (30 per cent), and the rest by March 15. It is considered an indicator of economic sentiment.