Direct tax revenue exceeds budget estimates after 3 years

After a three-year gap, direct tax collections — which include corporation tax and personal income tax — exceeded budget estimates for FY22, indicating an economic recovery. In line with the budget document, the government has revised upwards the direct tax collection estimates for the financial year 2021-22 from Rs 11.08 lakh crore in the budget estimates (BE) to Rs 12.50 lakh crore in the revised estimates (RE).

According to the RE, the government plans to collect Rs 6.35 lakh crore from corporation tax and Rs 6.15 lakh crore from personal income tax (PIT).
This compares to the BE figure of Rs 5.47 lakh crore and Rs 5.61 lakh crore in corporate tax and PIT, respectively.

The last time the government witnessed an increase in direct tax collection compared to budget estimates was in 2017-18. In 2017-18, the collection was revised upwards to Rs 10.05 lakh crore, from Rs 9.8 lakh crore in BE. The actual collection, however, was found to be Rs 10.02 lakh crore.

In line with the budget process, the government provides revenue collection or BE estimates before the start of a fiscal year. These figures are revised during the presentation of the BE for the following financial year. The actual fundraising figure, however, comes later after the end of the fiscal year.

Usually the tax collection at the end of the year is less than BE which is estimated before the start of a fiscal year. In 2018-19, the BE for direct tax collection was Rs 11.50 lakh crore, which was revised upwards to Rs 12 lakh crore. However, the actual collection turned out to be less than Rs 11.37 lakh crore.

In 2019-20, the BE for collection was set at Rs 13.35 lakh crore, which was revised down to Rs 11.70 lakh crore. The actual turned out to be even lower at Rs 10.49 lakh crore. In 2020-21, the direct tax collection in the budget estimates was Rs 13.19 lakh crore. The Covid-19 pandemic hit the country within a month of setting this target, forcing the government to drastically revise its collection target down to Rs 9.05 lakh crore in RE. The actual figures, however, turned out to be Rs 9.44 lakh crore.

Finance Minister Nirmala Sitharaman on Tuesday set the collection of direct tax at Rs 14.20 lakh crore for the financial year 2022-23. This includes Rs 7.20 lakh crore from corporate tax and Rs 7 lakh crore from PIT.

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