India's direct tax collection grew 16% in 10 months this fiscal, sharply lower than the 35% pace needed to meet the government's full-year projection.

According to figures available with the income-tax department, direct tax receipts in the current fiscal to February 5 grew to 3.6 lakh crore, against the government's full-year projection of 5.80 lakh crore.

The government had initially estimated a 20% increase in direct tax mopup in 2011-12 to 5.33 lakh crore, but the target was revised to 33% on the finance ministry's instructions.

"Unless there is a marked improvement in the economy in the coming six weeks, we would not be able to meet the revised target. We may, however, meet the original target," a senior I-T official said.

Although the fourth and final installment of advance tax is yet to come in (due by mid March), the I-T department could gauge the trend through payments received as tax deducted at source (TDS), self-assessment tax and tax paid after regular assessment.

TDS, the tax deposited with the I-T department within a month of deductions from clients or employees, accounts for 35%-40% of the total tax collected in a year. Going by the figure so far, the department says it may just be able to meet the original target of 5.33 lakh crore.

The tardy growth in tax mopup is attributed to a sluggish economy, which is reflected in the shrinking margins of several companies.

Another official said that factors such as almost nil tax outgo from oil companies, reduced margins of domestic banks and the order in the Vodafone tax case, involving a demand of 10,000 crore, were affecting collection this fiscal.

The department was also hoping to raise another 10,000 crore from cross-border acquisitions similar to Vodafone's acquisition of Hutch Essar. Taxes have also dried up from oil companies, which till last year were collectively paying over 20,000 crore.

However, the mopup from sectors such as pharma, FMCG, cement and foreign banks is likely to be better as reports indicate improved margins for companies.  (Economic Times)