Q2 ADVANCE TAX MOP-UP FALLS 25%
However, this is an improvement over the 40% decline seen in Q1; TDS down between 10 and 12% across jurisdictions
Advance tax collection from top jurisdictions is down around 25 per cent on average, as against about a 40 per cent decline seen in the first quarter, indicating improving optimism on earnings by corporate houses as the economy gradually recovers from the most stringent Covid-19-induced lockdown, seen in the previous quarter. Overall net direct taxes mop-up after the advance tax payments stood at ~3.28 trillion, down 25 per cent from last year’s ~4.4 trillion.
Advance tax collections from top jurisdictions have fallen by around 25 per cent on average, as against about 40 per cent decline seen in the first quarter (Q1), indicating optimism on earnings of corporate houses as the economy gradually recovers from the lockdown.
Overall, net direct tax collection after the advance tax payments stood at ~3.28 trillion, down 25 per cent from last year’s ~4.4 trillion. Gross collections are down 20.1 per cent to ~4.33 trillion and refunds up 4 per cent to ~1.05 trillion as of September 16. Incidentally, while Bengaluru had shown 10 per cent growth rate till a couple of days ago, an 18 per cent decline in advance tax mop dragged overall direct taxes growth in the city to just over 1 per cent. Nevertheless, the IT city was the only jurisdiction that showed growth in net direct tax collection.
Mumbai, which contributes about 30 per cent of country’s direct collections, saw the rate of contraction in advance tax collection lower to 20 per cent as against an over 33 per cent decline in Q1.
“The rate of decline in advance tax payments has certainly come down in Q2 and is on expected lines, with the economy reviving with the unlocking process. The trend is in line with the 24 per cent contraction in GDP in Q1. The next quarter will see further improvement with companies seeing improvement in earnings forecast,” said a government official.
Advance tax is paid as and when the money is earned, rather at the end of the fiscal year. It is considered an indication of economic sentiment.
The first installment or 15 per cent of advance tax is to be paid by June 15, the second by September 15 (30 per cent), third by December 15 (30 per cent) and the rest by March 15.
The rate of decline in Delhi reduced to 30 per cent from 45 per cent contraction in Q1 on a year-on-year basis. Kolkata and Hyderabad also saw the rate of contraction lower to 22 per cent and 20 per cent, from declines of 51 per cent and 36 per cent in Q1, respectively. For Ahmedabad and Pune saw the rate of decline was 20 per cent and 30 per cent.