The CBDT or the Central Board of Direct Taxes is all smiles as the Centre's net direct tax collections grew by a hefty 38% during April-August 2008, when compared to the same period last year.

All-India direct tax target of the Income Tax department for 2008 stands at an imposing Rs 4 lakh crore. But if one were to go by recent collections, this target doesn't seem out of reach.

Net Direct Tax Collection

Period (April-Aug)     Amount (Rs crore)
2007                               61,030      
2008                               84,409

During the period April-August 2008, the net direct tax collections stood at Rs 84,409 crore, up 38.31% from Rs 61.030 crore in the same period last year. The tax net is definitey widening but what has chiefly contributed to it?

Pankaj Jain, Managing Partner, Khandelwal Jain & Company said, "Since more and more people have to get their permanent account numbers for doing more transactions in the banking circles, they are coming within the tax net. At the same time, efforts are taken by the department in increased surveys which they are doing. They are trying to see that the compliances are being made by the high tax payers. The people who have been paying lesser amount of taxes are now paying more amount of taxes."

Avoiding legal hassles

Industry observers add that in the recent past, the taxman has frequently bordered on rampant and unreasonable litigation. Consequently, corporate India seems to have mellowed down.

Uday Ved, Head - Tax, KPMG India said, "There is a lot of litigation on both corporate tax related issues but more importantly on transfer pricing. There was a recent litigation on Vodafone and a couple of other companies. The corporates generally want to buy peace and the approach is to have the least litigation as might be possible. Considering these kind of litigation issues, corporates voluntarily want to estimate a fair income and pay a little bit more tax and reduce the litigation so that they can focus more on business."

According to sources, the second instalment of advance tax payments, due on September 15 will gauge the sustainance of the surge in tax collections but the real challenge the taxman faces is companies who defer such payments to coming quarters.