The government on Tuesday increased the direct tax target by Rs 30,000 crore for the current fiscal. The upward revision has been made "given the likely impact on government finances due to unanticipated drought", finance minister Pranab Mukherjee said.

Mukherjee increased the direct tax target, which was fixed in the Budget estimates at Rs 3,70,000 crore, to Rs 4,00,000 crore and exhorted top tax officials to make it possible given the "extremely challenging" situation.

"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," the FM told a gathering of chief commissioners and directors-general of income tax in the Capital.

The finance minister said the tax base in the country was small and there was still scope for improving it as instances of tax evasion and underpayment were still substantial. "The tax net, therefore, needs to be deepened further," Mukherjee told the gathering.

As direct taxes have become a major source of central revenue, their role has, accordingly, increased in shaping the economic future of India, the FM said.

The direct tax collections have grown at an average annual rate of 27% in the last five years and have more than trebled from Rs 1,05,088 crore in 2003-04 to Rs 3,38,212 crore in 2008-09 increasing its share from 4% to 6% of the GDP.

The finance minister applauded the department for taking several other initiatives to improve taxpayer services, including facilities of electronic payment of taxes. Last year, nearly one-sixth of the total tax returns were filed electronically, and nearly two-thirds of the gross taxes were paid electronically.

A Centralised Processing Centre has become operational at Bangalore and is likely to further speed up processing of returns and issue of refunds to taxpayers. The Refund Banker Scheme functional in six cities presently ensures that taxpayers get their refunds quickly and directly into their bank accounts.

Large Taxpayer Units, operational in four cities, have received good response.