I-T target hits record tax refund hurdle

Direct tax collection likely to fall short of Rs 8.47 lakh crore Budget target

Record tax refunds by the income tax (I-T) department so far this financial year (2016-17) to companies and individuals has adversely impacted the direct tax collection figures. 

With the year ending this month, the collection figures indicate that the finance ministry is unlikely to meet its ambitious collection target, according to two I-T department officials.

According to tax department data, total direct tax collection at the end of February was Rs 6.13 lakh crore, or 72.4 per cent of the full year’s target of Rs 8.47 lakh crore. In 2015-16, the department had collected Rs 5.55 lakh crore by February, and Rs 7.45 lakh crore by the end of the year. 

The tax collection, as a percentage of the target, till February this year is 200 basis points lower than February last year. In 2015-16, there was a shortfall of Rs 53,000 crore between the target and actual collections.

The Mumbai circle, which contributes over 33 per cent of the total direct tax collection, has collected Rs 1.88 lakh crore, or 69.6 per cent, against a target of Rs 2.7 lakh crore.

According to tax officials, the emphasis on expeditious clearing of refunds affected the tax collection numbers, leading to the shortfall. 

The I-T department had issued refunds to the tune of Rs 1.42 lakh crore in two tranches so far this financial year, 41.5 per cent higher than last year’s refunds. This was the first time the tax department gave high priority to refunds.

A senior I-T official said tax refunds would be calculated against this year’s collection even if they were for previous years.

Besides refunds reducing the tax kitty, the tax deducted at source (TDS), which contributes 37 per cent of the gross direct tax revenue before refunds, collection has been lower than in the previous year. 

“As TDS contributes a significant portion in the tax collection, its ever-growing importance cannot be ignored,” the official added.

Official data suggests that Mumbai’s TDS collection of Rs 80,000 crore (till February) was 2.6 per cent lower than that of the previous year. Mumbai’s TDS target this year is Rs 1 lakh crore. In 2015-16, total TDS collection was Rs 3.25 lakh crore.

To bolster the TDS figures, the tax department has sent 10,000 notices to the corporate entities and individuals in Mumbai alone. “Besides the regular explanation notices, we have identified and issued notices to 1,000 TDS defaulters who have deducted the tax but have not deposited it with the department,” said a senior I-T officer in the TDS section.

These 1,000 notices have being issued under Section 276 (b) of the I-T Act. The punishment for defaulter could be rigorous imprisonment for at least three months, extended to seven years, along with a penalty.

To tackle the tricky situation, the department is putting rigorous efforts to ensure that due taxes under this category are deposited accurately and on time. For this, it is doing spot verifications, including surveys. Cases where a person has either not deducted TDS or has deducted at lower rates, the I-T department will initiate penalty proceeding under Section 271C.

Sources said that the Central Board of Direct Taxes (CBDT) had instructed the TDS department to undertake multiple steps to augment revenue from TDS as it was a non-obtrusive but powerful instrument to prevent tax evasion as well as to expand the tax net.