💰What is the Government’s Tax Collection?

by Nireka Dalwadi

Investment Declaration and Tax Revenue

What’s Happening this week?


Year-end is just around the corner and employers are asking for investment declaration. Did your employer ask for one too?

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Catch-up Investments

It’s “that” time of the year. Christmas is just around the corner, New Year’s eve is here too… How would you summarize your year? Tell us all about it, and your employer too… Did you declare your investments to your employer?

Why should you tell them? Submit your investment declaration to your employer so that they can calculate and correctly deduct TDS i.e. Tax Deducted at Source on Salary Income. So Invest & Tell…

How to declare? Use Form 12BB to declare your investments for the financial year. As per the Income Tax Rule 26C — from 2016 onwards — employees are required to show the details of tax deductions to the employer. It is highly advisable to submit the investment declaration Form 12BB, However, it is not mandatory.Form 12BB: Investment Declaration | Help Center | QuickoForm 12BB is an Investment Declaration of a Financial year. Every year an employee submits Form 12BB to an employer at…learn.quicko.com

Let’s “Catch-up” with investments… At the beginning of the year i.e. April — employers ask for a declaration to calculate TDS for the year. Now, towards the last quarter of the FY i.e. January-March — employers ask for the proof of investments — to ensure they have deducted the correct TDS. Investments pick up during this time and are usually referred to as — Catch-up Investments.

Investments not in line with declaration? Well… in that case, the employer deducts extra TDS to ensure correct TDS is deducted. Oops! And that’s when the investments in tax-saving instruments pick-up their pace. Are you all set? Here are the most common ways to save tax:

Tax Collection

Who wants a tax rate cut? Everyone! The taxpayers demand it and the government wants to give one — But — the question is: Can we afford a Tax Cut? Let’s look at some numbers.

Numbers talking… India’s Tax Collection Shortfall could range between INR 2.16 Lakh crore in 2020–21 to INR 3.70 Lakh crore in 2024–25. The government in June told the FFC i.e. 15th Finance Commission that the Gross Tax Revenue could be much less than the estimated budget. According to some reports the shortfall is calculated to be nearly INR 15 Lakh crore in the next 5 years.

Then why the tax rate cut? The government in September reduced the corporate tax rate to 22% for existing companies from about 30% and further reduced it to 15% for new manufacturing companies. The primary motive behind this move was to aid the struggling Indian economy.

Did it have any impact? Let’s look at more recent numbers — the Advance Tax due date just passed this 15th December, reporting the advance tax revenue collection dropped to 5.2% for Q3 fell to nearly INR 73,000 crore from last year’s collection of INR 77,000 crore in October- December quarter. Well, this can be linked to the tax rate cut in September and tightened economic conditions.

Collection overflow… for the advance personal income tax collection rose from INR 24,000 crore Q3 last year to INR 33,000 crore in the same period this year. Groups have been urging the government to cut the personal tax rate to spur domestic demand and lift the economic growth — which sank to a six-year low at 4.5% in Q2 from 7% last year.

But can we afford a tax rate cut? The fiscal deficit which is Government Receipts — Government Expenditure touched INR 7 Trillion. The government needs to shell out more for subsidies amidst rising prices and extending support to the industrial sectors during the ongoing slowdown. FM Nirmala Sitharaman is expected to present measures to boost economic growth in the 2020–21 budget.

There is a lot of chatter on reduction in personal tax rates — guess we’ll just have to wait and watch.

Do you want to share your budget inputs? Government is all ears — tag @mygovindia on twitter and share your ideas/suggestions for #Budget2020

Byte of the Day

“Income Tax Cut can wait till bigger issues are resolved”


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