India is likely to face fall in the Direct Tax revenue for the ongoing financial year 2019-20, that's something happening for the first time in the past two decades. The sharp decline is due to the not so promising Economic Growth and reduction in corporate tax rates.
NDA Government aimed for Rs 13.5 trillion ($189 billion) in Direct Taxes for the financial year 2019-20. That's a 17 percent increase from the previous fiscal year. Whereas, The Economic Slowdown forced the companies to reduce investment and cut jobs. Only 5 percent growth was projected for the current fiscal, making it the slowest in 11 years. In the previous Budget presentation, Central Government offered a reduction in Corporate Tax rate to woo manufacturers. This move had a major impact on the Direct Tax revenue of the current financial year.
As of January 23rd this year, Income Tax Department managed to collect only Rs 7.3 trillion. Which indicates, Direct Tax revenue will fall well short of the target and may end up below Rs 11.5 trillion-mark. 10 percent lower than fiscal 2019 is estimated for now.
Direct Taxes account for around 80 percent of the annual revenue projected by the Government. Modi-led NDA Govt might have to compensate the shortfall in some other way to meet the expenditure commitments.