FY21 collections exceed estimates at ₹9.45 lakh cr.; ‘fiscal deficit may be lower’
India’s net direct tax collections for the pandemic-hit financial year 2020-21 grew by almost 5% year-on-year to ₹9.45 lakh crore, exceeding the revised estimates of ₹9.05 lakh crore presented in the Union Budget and reflecting a gradual economic recovery in recent months.
Tax experts said that the Vivad Se Vishwas Scheme to settle pending tax disputes also helped bolster the collections, with net Corporation tax collections for the year at ₹4.57 lakh crore.
Revenues from personal income tax, including the Securities Transaction Tax, were ₹4.88 lakh crore, as per provisional data released by the Finance Ministry on Friday. Direct tax refunds grew more than 42% in FY21 to ₹2.61 lakh crore from ₹1.83 lakh crore in the previous year.
“Despite an extremely challenging year, the Advance Tax collections for 2020-21 stand at ₹4.95 lakh crore which shows a growth of approximately 6.7% over the preceding financial year,” the Ministry said.
The improved direct tax collections, along with the recent uptick in inflows of indirect taxes, including the GST, suggest that India’s fiscal position may be better than the 9.5% of fiscal deficit projected in the revised estimates, said Devendra Pant, chief economist, India Ratings and Research.
‘Expenditure is the key’
“The fiscal deficit in 2020-21 may be lower than the revised estimate, provided there is no slippage on the expenditure side. This is further corroborated by the central government cancelling the last scheduled government borrowing in the previous financial year,” Mr. Pant said.
“The strong campaign for the Vivad Se Vishwas Scheme, the use of technology and digitisation, and the widening of tax base coupled with tax collected at source has contributed to higher tax collections,” said Samir Kanabar, tax partner at EY India.