Scanner on firms with low TDS

CBDT chief asks officers to scrutinise entities with a fall of more than 10% in collections

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 per cent 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 per cent in FY18. In the first half of the year — with a subdued economy — TDS collections grew by only 10.4 per cent. It had grown by 17 per cent in the same period last year (FY17).

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

Growth in advance tax collections also slowed to 11 per cent in the first half of FY18, against 14 per cent 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 per cent 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 per cent direct tax revenue comes from advance tax, 35 per cent from TDS, 10 per cent from self-assessment, and 10 per cent 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 ~2.5 lakh and ~5 lakh was cut to 5 per cent in the current year from 10 per cent. 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-thanexpected 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.