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| Advance Tax of India. |
In other words, payment of tax is not allowed to be deferred to the assessment year. Perhaps the motive of government is to collect the big amount of tax at the earliest.So Advance Tax is payable only if net tax payable.
As an added convenience, EFTPS allows taxpayers to schedule tax payments in advance. Businesses can schedule payments up to 120 days,With companies making advance tax payments and banks having to provision for them, liquidity has again tightened in the financial markets.
Liquidity crunch to worsen on advance tax payment. 13 December 2010. The liquidity crunch faced by banks is expected to continue, as companies get ready to pay the third tranche of advance corporate tax,This can also result in a position where the tax that needs to be paid keeps on increasing and this can be tackled through the advance tax payment route.
The liquidity crunch faced by banks is expected to continue, as companies get ready to pay the third tranche of advance corporate tax.The escalation in efforts by banks to mop resources at higher rates to fund credit is also weighing on the money markets.
This week is crucial on two counts. First, a large sum of money (estimated around Rs 50,000 crore) is expected to move to government coffers as advance tax by December 15. Second, the Reserve Bank of India (RBI) will announce the mid-quarter review of policy on Thursday.The borrowing at RBI’s liquidity adjustment facility by banks increased throughout last week. The daily withdrawal was much above Rs 1,00,00 crore.
Banks borrowed Rs 127,470 crore from the repo window and deposited Rs 10,465 crore at the reverse repo window. Net liquidity injected by RBI was Rs 1,17,005 crore compared to Rs 1,22,980 crore on Thursday.However, the liquidity strain did not have much impact on the money market. On Friday, the overnight call rate moved in a range of 6.30-6.70 per cent.
Experts said availability of the twin repo auction window with Reserve Bank of India and the leeway in statutory liquidity ratio given to banks until January 28 might help keep a check on the rise in call rate.But, analysts said, though RBI had announced various measures like relaxing the statutory liquidity ratio (SLR) requirement, the fund crunch has not eased. SLR is the amount that banks are mandated to park in government securities.
While some bankers expect the liquidity crunch to ease once the government starts spending, it is likely to continue till the end of this financial year, Samiran Chakraborty, StanChart Research’s regional head of research, India, and Nagaraj Kulkarni, senior rates strategist, said in a note.They arrived at this projection on the basis of two scenarios of fiscal deficit and government spending in the remaining months of the financial year.
In the first scenario, where the fiscal deficit is assumed to be five per cent of GDP (gross domestic product), the report said this could be maintained if the government limited the 2010-11 expenditure to Rs 12.2 lakh crore (against a budgeted Rs 11.1 lakh crore). This means the government will spend Rs 4.7 lakh crore between December 2010 and March 2011. “As a result of limited government expenditure, we estimate the end-March 2011 liquidity deficit at Rs 75,000 crore.On the other hand, if the fiscal deficit is 5.5 per cent of GDP, the government will have to spend around Rs 5 lakh crore in the rest of the financial year, and the liquidity deficit will be around Rs 50,000 crore.
