Tax collection may slip on refunds

The changes being introduced in the country's tax collection machinery may lead to a lower than budgeted tax collection in the current fiscal, according to senior officials of the income tax department.

Net tax collection has slipped to about Rs 9,300 crore in the first quarter of 2003-04 because of heavy refund payouts. At this rate, the department is likely to miss the aggregate direct tax collection target of Rs 95,000 crore set in the Budget for 2003-04. The department collected Rs 82,000 crore in direct axes in the last fiscal.

The officials said the department was also trying to ensure that taxpayers get their refunds within four months of filing their returns.

They said the Tax Information Network (TIN), which was being set up in collaboration with the National Securities Depository Limited (NSDL), was likely to be in place by October 1 this year.

This would lead to the dematerialisation of tax-deducted-at-source (TDS) certificates and challans in a manner similar to that of share certificates. This means taxpayers will no longer need to carry paper copies of their tax challans. They will be able to rely on the NSDL network for accessing their tax data.

The government will benefit from the fact that tax collections will be credited in a time cycle of T+1 days. They centralisation of the tax data under TIN will also allow the department to scrutinise high-value transactions and take appropriate steps to increase collections.

The necessary guidelines relating to the use of TIN data would be in place only by April 2004, the officials said. The network will generate random cases, which will then be taken up for scrutiny. For this fiscal, however, the department will rely on voluntary compliance by taxpayers.

The officials said because of these changes it was possible that the tax target might not be met. The department has kept unchanged the number of cases that each income tax range is expected take up for special scrutiny at 250 for metros and at 200 for non-metro areas.

The officials added that about 2 million TDS returns are filed annually by corporates, amounting to a total of about Rs 20,000 crore. This accounts for about slightly less than 50 per cent of the entire income tax collections. The officials said the dematerialisation of the TDS certificates would go a long way in eliminating paperwork and increasing the efficiency of the income tax department.

The department conducted a pilot study in the four metros in June to check the feasibility of a T+1 cycle. The experiment, which yielded a transfer of Rs 1,600 crore to the treasury in the T+2 cycle, will be extended to six other cities in September for collecting the second instalment of advance tax. At present, it takes about 15 days to credit tax to the department.