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Indian Ministry Of Finance Records Increase In Net Tax Collections

by Mary Swire,, Hong Kong

12 September 2008

The Central Board of Direct Taxes at the Indian Ministry of Finance has announced that direct tax collections in the first five months in the present fiscal year registered growth of 38.31%.

Growth in Corporate Taxes registered 43.49%, while Personal Income Tax (including FBT, STT and BCTT) grew by 31.79%.

Growth of Fringe Benefit Tax (FBT) was 31.85%; Securities Transaction Tax (STT) was 15.10% up; and Banking Cash Transaction Tax (BCTT) was -21.36%.

Among regions, tax growth in Delhi and Mumbai was 76.23% and 32.49%, respectively. Other regions with high tax growth are Nagpur 88.75%; Kochi 58.07%; Kolkata 56.82%; Bhubaneshwar 53.59% and Bangaluru 48.87%.

Overall growth in tax deducted at source (TDS) was more than 40% but growth in corporate TDS was 55.22%. Corporate TDS collections had also shown a significant increase compared to the corresponding period last year. This was also the result of several TDS verifications and surveys carried out by the Income Tax department, which led to detection of tax not deducted or not paid to the government account after deduction.

Robust growth in direct taxes has been maintained despite substantially higher relief to individual taxpayers announced by the Finance Minister in the Union Budget 2008.

Therefore, higher growth in TDS collections demonstrates the good health of the Indian economy and indicates further improvement in tax administration and tax compliance levels. The cost of direct tax collection, on the other hand, which had declined to an all-time low of 0.54% during fiscal 2007-08, is likely to further decline to about 0.43% during the current fiscal year, the lowest among all large economies in the world.

Robust growth of over 35% in direct taxes during the past few years has helped the central government in meeting FRBM targets, focus on developmental and social programmes, and declare higher pay and allowances for its employees.

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