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At ₹9.45-lakh cr, FY21 direct tax mop-up 5% over RE

Our Bureau New Delhi | Updated on April 09, 2021

Fiscal deficit seen lower with bounce in indirect tax collections

Direct tax collections in 2020-21 registered a nearly 5 per cent growth over the Revised Estimate of FY21, the Finance Ministry said on Friday.

Along with the bounce in indirect tax collections, there is optimism that the fiscal deficit would be lower than the Revised Estimate.

Provisional figures show direct tax collections at ₹9.45-lakh crore. “The net direct tax collections represent 104.46 per cent of the Revised Estimates of ₹9.05-lakh crore for FY21,” said a Finance Ministry statement. However, it is lower than the net direct tax collection of 2019-20 of ₹10.51-lakh crore.

“Net direct tax collections for the FY21 have shown an upswing despite the inherent challenges brought on by the Covid-19 on the economy,” the Ministry said. Further, it highlighted that this is despite higher refunds in FY21 of ₹2.61-lakh crore as against ₹1.83-lakh crore during FY20.

Advance tax collections

The Ministry said that despite an extremely challenging year, advance tax collections for FY21 stood at ₹4.95-lakh crore, up 6.7 per cent over the mop up in the previous financial year of ₹4.64 lakh crore.

Economy recovering

Devendra Kumar Pant, Chief Economist with India Ratings and Research, said the economy is slowly recovering and with Q3 of FY21 registering positive growth after two consecutive quarters of negative growth, the numbers are on expected lines. “This, along with the indirect tax collections, suggests that the fiscal deficit for FY21 may be lower than the Revised Estimate, provided there is no slippage on expenditure side. This is corroborated by the Centre cancelling the fiscal year’s last scheduled government borrowing plan,” he said.

Aditi Nayar, Chief Economist with ICRA, feels that the collections appear to have contracted by a modest 3.5 per cent in March 2021, suggesting the back-ended release of refunds. Regardless, “with direct and indirect tax collections exceeding the Revised Estimates, we expect the fiscal deficit to be limited to ₹17-17.2-lakh crore for the just-concluded fiscal,” she said.

Further, she said that with the contraction in direct taxes in FY2021 limited to 10 per cent, the growth target for FY2022, per the Budget Estimates is now around 17 per cent, only modestly higher than the projected nominal GDP growth.

 

Published on April 09, 2021

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