Scanner on firms with low TDS collections

CBDT boss asks officers to scrutinise entities with 10% lower numbers

Worried about the steep direct tax collections target for this financial year (FY18), Central Board of Direct Taxes (CBDT) Chairman Sushil Chandra has asked field officials to scrutinise entities and companies that have reported more than a 10% fall in tax deducted at source (TDS) in the first half of the current fiscal year.

The CBDT has been set a target of increasing direct tax collections by 15.7% in FY18. In the first half of the year — with a subdued economy — TDS collections grew by only 10.4%. It had grown by 17% in the same period last year (FY17).

TDS revenue mop-up stands at a little over Rs 1.95 lakh crore this year.

Growth in advance tax collections also slowed to 11% in the first half of FY18, against 14% a year ago, throwing a shadow on the tax collection target.

“The tax collection target is indeed steep this year, considering the fact that economic growth is subdued. The department is now conducting surveys in cases where TDS payment is more than 10% lower than last year,” said a government official.

CBDT Chairman Chandra said some regions in the country were showing negative or single-digit figures. “We are checking cases where there is large scale non-deduction of TDS and also where entities have not deposited TDS already deducted.” 

Field officials, however, say most cases with less growth seem legitimate, as the demand in the economy is quite muted at the moment. There have also been reports of companies cutting workforce.

About 45% direct tax revenue comes from advance tax, 35% from TDS, 10% from self-assessment, and 10% from recovery.

The department has also been asked to keep a tab on TDS defaulters and file criminal prosecution complaints on a case-to- case basis.

Growth in the second half might be even more depressed on account of upward revisions in tax returns because of demonetisation and the two income-declaration schemes last year.

Besides, the tax rate on annual income between Rs 2.5 lakh and Rs 5 lakh was cut to 5% in the current year from 10%. This may, in turn, disturb the fiscal math at a time when the economy is in need of additional expenditure.

Fiscal consolidation is facing challenges from the non-tax revenue because of lower-than-expected receipts from spectrum sale.

Officials said the revenue collection target might need to be revised downward with the economic outlook looking muted in the second half.

Advance tax — paid up front rather than at the end of the fiscal year — might also be a problem.

“Advance tax collections have been particularly bad in the corporate sector. The slowing economy is a big challenge. The collection target for the fiscal year may come under stress if the economy does not pick up pace quickly,” said an official.