Corporate tax collection fell below personal income tax collection for the first time in 12 years due to lower tax rates and the COVID-19 impact on businesses. The corporate income tax collection for FY21 stood at Rs 4.57 lakh crore, while total personal income tax was at Rs 4.69 lakh crore. Corporate tax is charged from corporations or companies, while personal income tax is levied on individual incomes.
Both corporate and personal income tax collections shrunk in the financial year 2020-21 by 18 per cent and 2.3 per cent, respectively, data from the Controller General of Accounts suggest. The Modi government in September 2019 had slashed corporate tax rates by around 10 percentage points. New corporate tax rates for existing companies stand at 25 per cent while for new ones in manufacturing, it's 17 per cent.
Experts say lower tax rates and GDP fall have led to lower corporate tax collection. "A reduction in tax rates and contraction in GDP due to the pandemic could explain the fall in corporate tax collections," NR Bhanumurthy, vice-chancellor at Bengaluru's Dr BR Ambedkar School of Economics University, said, reported The Print.
COVID-19 hit India's economy hard. The fiscal deficit stood at 9.3 per cent of GDP in FY21, while the GDP shrunk by - 7.3 per cent.
The contraction in FY21 GDP is worse in more than 40 years, the government data shows. The economy has shown signs of improvement compared to the previous quarters, but the current COVID-19 situation in the country has forced the forecasters to trim their GDP projections for both Q4 and Q1 of FY22.
While most analysts had projected double-digit growth in FY22, albeit, on a lower base, the second wave of the COVID-19 pandemic and lockdowns imposed by state governments to control the surge in cases have led to revisions in growth estimates. For the first quarter of 2021-22, median forecasts by rating agencies and major economists stood at 21.6 per cent, lower than 23 per cent predicted earlier.
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