Direct Tax Collection Set to Dip First Time in Two Decades: Report

“Forget the target. This will be the first time that we’ll see a fall in direct tax collection,” an official said.

With just about a week to go for the Union Budget 2020, a report has now come to the fore suggesting that India's direct tax collection for the current fiscal is likely to witness a fall for the first time in two decades.

According to a Reuters report which quotes senior tax officials, the government is set to fall well short of the direct tax target for the financial year 2019-20 – ie, Rs 13.5 lakh crore.

According to the report, as of 23 January, the tax department had managed to collect Rs 7.3 lakh crore as direct taxes, which include income tax and corporate tax.

The officials quoted by the report suggest that the direct tax collection will in fact fall even below the 2018-19 figure of Rs 11.5 lakh crore.

“Forget the target. This will be the first time that we’ll see a fall in direct tax collection ever,” the report quoted an official, as saying.

Corporate Tax Cut, Poor Economy Reasons Behind Fall

The report suggests that the poor state of economy in general, due to which India's growth rate is expected to come at an 11-year low of 5 percent for the current fiscal, is the primary reason behind the dip in direct tax collection.

The decline in demand across businesses has forced companies to cut investment and jobs, denting tax collections, the report said.

Besides, the government's last year decision to slash corporate taxes also hampered the collections, the tax officials suggested adding they were not hopeful of the tax mop-up picking up in the last quarter due to the sluggish nature of the economy.