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Waning Base Effect: Direct tax revenues down a fifth in October

Waning Base Effect: Direct tax revenues down a fifth in October

Growth in tax collections has been beating other macro-economic indicators, but it seems the trend is coming to an end, with the petering out of the advantage of low base. The Centre’s tax kitty has been swelling in recent months, giving it great comfort as it presides over an economy which is still in the throes of regaining footing.

Gross direct tax collections (net of refunds, but before devolution to states) grew an impressive 70% on year in April-October of the current financial year to Rs 6.45 lakh crore, according to data gathered by FE. However, the growth rate has been slowing over months. On an annual basis, these collections grew 103% on year in July, 66% in August, 59% in September, but saw a decline of 21% in October, reflecting the fizzling out of the low base effect. Tax collections had improved in the year-ago period, after Covid-induced lockdown was lifted.

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