Corporate Advance Tax Stagnates in Q4, but Overall Direct Tax Collections Up 13%

Moneylife Digital Team 18 March 2025

Economy & Nation

The Indian government’s tax coffers appear robust as direct tax collections for the financial year 2024–25 surged by 13.13% to reach Rs21.27 lakh crore as of 16 March 2025. This significant rise comes, despite muted growth in corporate advance tax collections during the fourth quarter, indicating resilience in non-corporate contributions and robust securities transaction tax (STT) collections.

However, the subdued corporate advance tax growth of just over 12% has sparked debates on whether it reflects a cautious stance from businesses due to global economic volatility or signals stress in key industrial sectors. Media reports point to the possibility of moderated profit expectations and a conservative outlook as companies brace for potential headwinds.

According to data released by the income-tax (I-T) department, the net collection of direct taxes increased to Rs21,26,923 crore compared to Rs18,80,055 crore in the same period of the previous fiscal year. The surge is driven primarily by strong personal income-tax contributions and higher STT, even as corporate advance tax growth lagged.

The data revealed that corporate advance tax collections recorded a modest growth of 12.54% year-on-year (y-o-y), rising from Rs6.72 lakh crore to Rs7.57 lakh crore. This subdued performance in the fourth quarter raises concerns about corporate profitability and tax compliance amidst economic uncertainties and sectoral slowdowns.

In contrast, non-corporate advance tax collections rose by an impressive 20.47%, climbing from Rs2.38 lakh crore to Rs2.87 lakh crore. This strong performance by individuals, Hindu undivided families (HUFs), companies and other non-corporate entities has provided a much-needed cushion to the overall tax revenue.

Despite the lukewarm corporate tax performance, the Union government remains confident of exceeding the revised tax collection target of Rs22.37 lakh crore for FY24-25. The Union Budget had previously revised the direct tax collection estimate upward, and the current figures suggest that the target is well within reach.

According to media reports, the robust net collections are attributed to improved compliance, a wider tax base, increased digital surveillance, and efficient tax administration. Automated scrutiny and data-driven assessments have further bolstered compliance among individual taxpayers and smaller entities.

The gross direct tax collections for FY24-25 amounted to Rs25.87 lakh crore, marking a 16.15% increase from Rs22.27 lakh crore in the previous fiscal. After accounting for refunds amounting to Rs4.60 lakh crore, net collections stood at Rs21.26 lakh crore.

While muted growth in corporate advance tax signals caution, robust non-corporate and STT collections underpin the government’s confidence. The sustained rise in direct taxes could strengthen the fiscal position and support planned capital expenditure which is vital for sustaining economic momentum amid global uncertainties.

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