The Union Finance Minister, Pranab Mukherjee has increased direct tax collection target by Rs 30,000 crore for the current fiscal to Rs 4 lakh crore up from earlier set budgetary target of Rs 3.7 lakh crore.
The minister was speaking at the annual conference of chief commissioners and directors general of Income Tax. He stated the confided target for direct taxes set in the union budget for the current fiscal will be surpassed.
"I know what I am asking you to achieve is an extremely challenging target given the current economic situation. But it is equally true that if such a target has to be achieved, it can only be done by the direct tax," FM said that the conference.
The minister reasoned that the tax base in the country is small and tax evasion and underpayment are still substantial. "The tax net, therefore, needs to be deepened further," the minister said.
The minister also reasoned the negative impact of weak monsoon on government finances - "Given the likely impact on government finances due to unanticipated drought", he added.
The minister indicated that the direct tax has become one of the major sources of central revenue. In the last five years, the direct tax collections has gown by an average annual rate of 27 percent. The share of direct taxes in GDP has increased to 6% during 2008-09 from 4% during 2003-04.
During the first four months of 2009/10, the income tax collections grew by 4.33 percent to Rs 312.79 billion, while corporate tax receipts were up 2.6 percent to Rs 426.85 billion.
In India, direct taxation is under the control of Central Board of Direct Taxes (CBDT), which is a division of Department of revenue under Ministry of Finance. The department is governed by the Revenue Act 1963.
These taxes are recovered directly from the taxpayer. Capital gains tax, property tax, personal income tax (including FBT, STT and BCTT) and tax on corporate income all come under the purview of direct tax.
The Union Budget 09-10 proposed an increase in the exemption limit for wealth tax, which is also a type of direct tax.
The Chairman of Central Board of Direct Taxes, SS N Murthy said, "This is an aspiration we will try to achieve it (revised target)."