Covid-19 hits salaries, income tax collections plunge in FY21

One of the remarkable aspects of income tax collection in FY21 was that individual income tax surpassed corporate tax by about Rs 12,000 crore. There is another information – there has been a dip in tax collections in 17 out of the 18 regions in the country, a phenomenon that IT officers could not recall in the past two decades.

Kanpur down 27%

Provisional data of FY21 shows that Kanpur region witnessed a year on year (YoY) decline of tax collections of 27.7%. This is the sharpest fall witnessed in any centre in the country.

Kanpur is a tier-II region.

Among the tier-I regions, Delhi has witnessed the highest YoY drop at 20%.

The only region which stands in the positive side is Bangalore. The city witnessed a YoY growth of 7.4%.

Other prominent regions which are witnessed a contraction in Income Tax collection are Chennai (16%), Pune (11.3%), Ahmadabad (8,1%), Mumbai (8%), Kolkata (5.7%) and Hyderabad (2.4%).

Among the tier-II regions apart from Kanpur that have suffered contraction in tax collections are Bhopal (25.7%), Bhubaneswar (24.3%), Lucknow (19.1%), Guwahati (18%), Patna (15.5%), Chandigarh (14.2%), Kochi (12.8%), Nagpur (4.2%) and Jaipur (1.9%).

Mumbai region

Provisional data shows that Mumbai region is leading from the front in tax collection. This region contributes almost 32% to the country’s personal tax collections.

For the period ending March 2021, Mumbai region collected Rs 2.94 lakh crore followed by Bengaluru at Rs 1.18 lakh crore and Delhi region at Rs 1.17 lakh crore.

Other prominent contributors are Chennai (Rs 60,000 crore), Hyderabad (Rs 55,500 crore), Pune (Rs 50,500 crore), Ahmadabad (Rs 46,000 crore) , Kolkata (Rs 38,800 crore) and Chandigarh (Rs 37,000 crore).

Among the tier-II regions Bhopal’s contribution stands at Rs 17,621 cr, Kanpur’s Rs 17,400 cr.

Jaipur comes next with Rs 16,950 crore while Kochi’s figure is Rs 13,800 crore. Bhubaneswar, Lucknow and Patna’s collections vary between Rs 10,970 crore and Rs 10,150 crore.

Guwahati and Nagpur stand at the bottom with only Rs 5,500 crore and Rs 5,300 crore respectively.

Corporate vs Individual

Data shows that in the fiscal year 2021 total personal income tax collection stands at Rs 4.69 lakh crore. On the other hand, corporate tax collection stands at Rs 4.56 lakh crore.

Out of 18 regions only Mumbai region passed through Rs 1 lakh crore in both categories of taxes. Provisional data shows here corporate tax collection stands at Rs 1.66 lakh crore while personal tax collection stands at Rs 1.10 lakh crore.

Delhi, Kolkata and Bhubaneswar are the other three regions where corporate income tax surpassed personal income tax during the pandemic-hit year. In other 14 regions income tax collection is more than corporate tax collection, data show.

In Delhi, the gap between corporate tax and income tax is around Rs 4,000 crore. For Kolkata, it is around Rs 3,500 crore and for Bhubaneswar, the gap is about Rs 1,200 crore.

Reasons

Experts indicate that corporate tax collection was affected by the pandemic. But the reduction of corporate tax rate from 30% to 22% might be a reason.

“Provisional data show overall tax collection dipped by over 10% and that is due to Covid. Next year, it should make up for the decline,” said Narayan Jain, a tax consultant.

“Corporate tax rate cut and pandemic, both played a major role and for that the tax collection dropped by 10%, which was 8% and 5% in FY20 and FY19 respectively,” said Avik Roy, senior director general, Bharat Chamber of Commerce.