The Hindu Business Line : I-T collections overestimated on challan confusion

FOR the first ever time, the Centre's revenue collections from personal income-tax have exceeded that from corporation tax during the current fiscal, sparking off questions regarding the sources behind the unusual buoyancy in the former.

As per the Controller General of Account's latest data, the Centre's net revenues from personal income-tax during April-October 2004, at Rs 26,874 crore, surpassed the Rs 25,409 crore mobilised from corporation tax over the same period.

Also, the year-on-year growth in income-tax collections amounted to a whopping 54.8 per cent, against the corresponding 21.4 per cent in the case of corporation tax.

On the other hand, the Union Budget had estimated collections from personal income-tax during the entire current fiscal at Rs 50,929 crore, which is much lower than the Rs 88,436 crore budgeted from corporates.

How does one, then, account for this seemingly divergent trend, wherein revenues from income-tax have surged ahead of the Centre's corporation tax mop-up?

When contacted, a senior Revenue Department official ascribed the rather heady jump in personal income-tax collections this fiscal to a statistical blip arising from `inadvertent mis-declaration' by corporation assessees.

And this, in turn, has ironically been the outcome of the Department's recent efforts to simplify the tax payment mechanism and usher in an Online Tax Accounting System (OLTAS) from June 1, this year.

Simplification complicates: A major component of the new taxpayer-friendly payment regime was replacing the earlier seven different types of challans (with four copies) for depositing direct taxes with only three single-copy challans. While earlier there was a red coloured challan for corporation tax and a separate blue one for personal income-tax payments, the new system put in place a single unified `ITNS-280' challan for payment of personal income-tax, corporation tax and wealth tax for all non-TDS (tax deducted at source) purposes.

But as it has turned out, the new challan system has led to large-scale misclassification of tax revenues due to incorrect recording by corporate assessees.

The new challan basically contains two separate boxes, which assessees have to choose while recording their payments.

The first one pertains to corporation tax and the other to income-tax.

"A number of companies have wrongly ticked the income-tax box while making payments, in the mistaken notion that corporation tax is meant for payment to the municipality.

"Also, since the challan does not clearly specify income-tax as personal income-tax, a lot of corporates have ended up recording their payments under the income-tax head," the Revenue Department official said.

According to him, during June-September alone, some 80-odd companies are estimated to have wrongly recorded corporation tax payments under the income-tax head, leading to misclassification to the extent of Rs 6,000 crore.

"To that extent, there has been an overestimation of personal income tax collections and underestimation of corporation tax collections," the official added.

The official hoped that the misclassification anomaly would be sorted out in the coming days, as the Department has instructed field formations to guide corporate assesses to record the correct entries in their challans, while making payments for the next advance tax instalment due by December 15.