According to a report published by Business Standard, the income tax department is seeking a downward revision of direct tax revenue targets. The department seeks a cut of Rs 1 trillion in the revenue target for the financial year 2019-20 (FY20).
The request is in the backdrop of falling direct tax collections for the FY20. The overall tax collections until 31 October have grown at 3% only. While the personal tax collection has grown at 5%, the corporate tax collection has grown by just 0.5%.
The overall revenue expansion target has been pegged at 17.5% at Rs 13.35 lakh crore for FY20. The corporate tax target has been pegged at 15.4% at Rs 7.66 lakh crore, and above 22% for personal taxes.
The department is seeking a revision given the practical challenges due to corporate tax cuts and slowing economic activity. If the target is not revised, the department would be forced to increase its tax collections by around 30% for the remaining few months of FY20.
The government had announced an across the board corporate tax rate cut for the FY20. The rate cut would lead to a revenue shortfall of about Rs 1.45 lakh crore. According to the department, the rate cuts would help in reviving economic growth and tax collections only in the medium-term to long-term. However, the department faces an unrealistic target for the short term for the ongoing FY20.
The overall tax collection for the FY20 has crossed Rs 5 trillion (till 31 October) as compared to the FY20 target of 13.35 lakh crore.
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I am a Chartered Accountant by profession. I specialise in personal taxes and corporate income tax matters. I am an avid reader and track developments in financial markets, economy and other market developments.