New Delhi: Advance corporate tax payment in the country’s top two cities grew at a slow pace in the latest quarter and some companies in the financial sector recorded a decline in the payment, indicating a possible impact of the global financial crisis on the profit estimates of local companies.
According to preliminary data with the government, advance tax collections from companies for the three months ended 15 September in Mumbai increased year-on-year by 8% to Rs10,957 crore and that in New Delhi rose by 2% to Rs5,826 crore compared with a Budget estimate of 19.91% growth for 2008-09.
Between them, Mumbai and New Delhi contribute about 63% of corporate taxes paid annually by companies. Companies pay taxes every quarter—in June, September, December and March—through advance taxes based on their profit projections for the year and tax deducted at source when payments are made to contractors are also paid at the same time.
Profit Expectations (Graphic)
Most taxes paid by companies come through advance taxes, said an income-tax official, who did not want to be identified. Advance tax data generally serve as a proxy for industry’s profit expectation in a year.
The financial sector, where advance tax payments grew sharply last year, showed a mixed performance in the quarter ended 15 September. ICICI Bank Ltd, DSP Merrill Lynch Ltd and Citibank India paid much lower advance tax compared with the same period last year.
Tata Steel Ltd, Bharat Heavy Electricals Ltd (Bhel), and government-owned telecom company Bharat Sanchar Nigam Ltd (BSNL) recorded a growth year-on-year in advance taxes paid.
State-owned Bhel, the country’s largest power generation equipment company, paid an advance tax of Rs300 crore, 42.86% more than what it paid a year ago, while BSNL’s advance tax payment was Rs311.97 crore, up 197.48% from last year.
Reliance Industries Ltd and Bennett, Coleman and Co. Ltd showed a decline in their advance tax payments compared with last year.