The government will come down heavily on corporates seeking to postpone their tax payments due on March 15 to the first quarter of 1997-98 to take advantage of the tax cuts proposed in the 1997-98 budget. The finance ministry, which is monitoring the tax collections, has issued this warning in a press note issued in New Delhi yesterday.
Advance tax rules require corporate tax to be paid in four instalments in the proportion of 15 per cent, 30 per cent, 30 per cent and 25 per cent. Income tax has to be paid in three instalments of 30 per cent, 30 per cent and 40 per cent. On March 15, the government has to receive 25 per cent of corporation tax and 40 per cent of income tax as advance payments.
In a letter to the chief commissioners of income tax, revenue secretary N K Singh has clarified that accounting is on an accrual basis and therefore it is not possible for corporates to postpone payments to the first quarter of the next financial year.
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In addition, the expected level of advance payment due on March 15 has to match the payments made in the earlier quarters.
The government is expecting a significant improvement in the realisation of revenue from minimum alternate tax, with the finance minister opting to retain it.
The chief commissioners have been told to ensure that all the top companies pay their advance tax dues, says the release.
At the end of December 31, 1996, with the government having received the third instalment of advance tax payments, the collection was Rs 12,222 crore under corporation tax (as compared with Rs 11,578 crore in the same period of 1995-96) and Rs 11,605 crore under income tax (Rs 9,749 crore). The aggregate direct tax collection was Rs 23,827 crore, against the target of Rs 39,403 crore for 1996-97.