'Keep a close watch on taxpayers depositing advance tax', Income Tax Department gave important order

The Central Board of Direct Taxes or the CBDT has directed the Income Tax officials to closely monitor the high-value taxpayers who pay advance tax as one of the steps to augment the collection through direct tax in the ongoing financial year. Instructions were also issued to detect false claims of exemptions and deductions. Advance tax is the amount that is paid upfront on or before the 15th of the last month of each quarter in four installments in a financial year.

CBDT has issued the Central Action Plan (CAP) 2025-26. The CAP is an orientation for the department to drive key performance areas of revenue collections. As per the budget estimates laid out in February, the amount of Rs 25.20 lakh crore has been targeted by the central government under the head of direct taxes during the ongoing fiscal. This is comprised of Rs 10.82 lakh crore as corporate tax, Rs 13.60 lakh crore as non-corporate tax and Rs 78,000 crore as securities transaction tax (STT).

The net direct tax collection for 2024-25 has slightly missed the target. It has grown by 13.57 per cent to over Rs 22.26 lakh crore. The target was revised to Rs 22.37 lakh crore in the budget presented in February. It was Rs 22.07 lakh crore in July 2024. The CAP has suggested the Income Tax Department to conduct regional analysis for better tax collection while dealing with the negative trends of tax payment.

The CAP suggests that appropriate action should be taken where revenue is not at the expected level. The department has been asked to lay special emphasis on collecting outstanding and current demand and take action against taxpayers who do not follow the governance. The Commissioner of Income Tax (Appeals) has confirmed demands of Rs 1.95 lakh crore in 2024-25. Assessing officers have been asked to make every effort to recover this revenue within the current financial year.

The CAP has also asked the tax department to organize events and raise awareness among taxpayers about correct claims of deductions and exemptions and educate them about filing updated income tax returns. This will give time to those who have missed reporting the correct income. These efforts will potentially increase the number of taxpayers opting for the new tax regime. There are no deductions or exemptions in this system which will reduce the misuse of deductions.

The tax department has also been asked to issue prompt refunds, so as to avoid negative impact on interest payments and the overall budget. The department issued the highest ever refund of Rs 4.77 lakh crore during 2024-25. This is 26.04 per cent more than the refund of Rs 3.78 lakh crore issued in 2023-24.