New Delhi: Preliminary data on the first instalment of advance tax payments by companies in 2009-10 showed a mixed picture: A marginal increase in tax collection over the same period last year, supported primarily by higher collections from public sector banks.
According to a finance ministry official, who didn’t want to be named, broad trends of the first instalment showed tax collections from financial sector was high, while that from manufacturing was flat. Tax collections from real estate companies declined, the official said. Quarterly advance tax payments are a lead indicator of the kind of borrowing the Union government might have to undertake as tax collections are the primary source of government revenue.
In 2008-09, advance tax payments contributed about 43% of overall gross direct tax collections of Rs3.75 trillion. After accounting for refunds, the net collections stood at Rs3.34 trillion in 2008-09.
Quarterly advance tax payments are a lead indicator of the kind of borrowing the Union government might have to undertake as tax collections are the primary source of government revenue. Ahmed Raza Khan / Mint
The tax payments by banks may not necessarily be a good proxy for the trend in the next three quarters as the interest rate environment was favourable to banks in the recent past, an analyst said.
State Bank of India was the largest taxpayer in the 1 April-15 June period, according to finance ministry data. State Bank paid Rs1,068 crore in the quarter, higher by 61% over the same period last year. India’s largest lender by assets replaced public sector Oil and Natural Gas Corp. Ltd as the largest taxpayer in the quarter.
Finance ministry data for 34 companies, including 25 largest payers, showed collection in first instalment of advance tax payments in the year to 31 March stood at Rs8,040 crore, higher by 4% over the same period’s collection in the previous fiscal.
Finance ministry projections for overall collections of the first instalment of advance tax in the current fiscal is expected to be about Rs22,000 crore to Rs23,000 crore compared with collections of Rs21,184 crore in same period last year, the official said.
“I will not be attaching too much significance to advance tax figures (of banks),” J. Ganeshram, banking analyst at Spark Capital Advisors (India) Pvt. Ltd, said.
According to Ganeshram, the bad debt provisions of banks are expected to increase in the second half of 2009-10, which might adversely impact advance tax payments by banks.
Banks’ profit between 1 April and 15 June was higher than last year as gains from their bond portfolios were boosted by a soft interest rate regime compared with a year ago when interest rates were hardening.
Year-on-year growth in the first instalment of advance tax payments, four public sector banks topped the list. Bank of India, State Bank, Bank of Baroda and Punjab National Bank recorded the highest growth.