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New Delhi: Large established businesses have not only withstood the economic contraction induced by the coronavirus pandemic in FY21, but posted strong double-digit growth, more than making up for the drop in income seen by smaller companies and lifting the overall gross corporate income by 30% in the pandemic year from the year-ago period, official data from Central Board of Direct Taxes (CBDT) showed.

 

Experts described the overall gross corporate income surge of 29.7% in the year in which the economy contracted by 5.8% as “counter-intuitive” but attributed the trend to the well-established supply chains and logistics facilities of big businesses which enabled them to beat the pandemic. Experts also attributed the trend to the quick recovery of businesses from the first wave of the pandemic as the economy which had shrunk by 23.4% in the June quarter and by 5.7% in the September quarter of FY21 had re-entered positive territory by the December quarter which limited the overall impact on the corporate sector.

Data from CBDT showed that in FY21, companies with gross income (before allowable deductions) of 5 crore and more have reported double digit annual profit growth. The higher the income range of the company, the more the pace of profit growth.

CBDT data showed that not only has the number of companies in the 50 crore- 100 crore gross income range gone up from 1,395 in FY20 to 1,715 in FY21, the sum of gross income in this class of companies surged 21% annually in FY21 to 1.19 trillion. Similarly, the number of companies in the 100 crore- 500 crore range shot up from 1,472 in FY20 to 1,851 in FY21 and the gross income of all companies in this range shot up 24% to 3.87 trillion. The number of the largest companies in the 500 crore plus income range grew from 413 in FY20 to 554 in FY21 and the sum of gross income of businesses in this range shot up 39% in FY21 to 12.7 trillion from 9 trillion a year ago. Overall, gross corporate income shot up 29.7% in FY21 to 21.5 trillion. However, businesses in the lower income range reported a dismal performance in FY21. Smaller companies with income up to 1 crore have seen either a contraction or very subdued growth in income. Their performance ranged from a 3.7% contraction to a growth of a maximum of 3.7% in FY21, implying that smaller businesses were not as capable of withstanding the pandemic’s impact on the economy.

Sudhir Kapadia, partner, tax and regulatory services at EY, said after the lockdown, the economy opened up in India fairly quickly in FY21. “The broad inference, one could make is that larger companies were able to withstand the lockdown much better because of their logistical strength and wider reach of distributors, etc. In addition, they were able to benefit from the boost that e-commerce received in the period. While every business got affected initially during the pandemic, very quickly, we found that in each sector, the top companies started benefiting because of the trust their customers had in their services and their ability to work remotely,” said Kapadia. The combination of base effect and post-covid boost top companies got could explain the trend of overall surge in gross corporate income in FY21, explained Kapadia.

“Large corporations were able to perform better than small businesses because of their organizational capabilities and the boost that the digital economy received. Secondly, the covid impact was more pronounced in sectors such as aviation, entertainment and hospitality while supply of items of daily consumption continued and those sectors did very well,” said Ved Jain, former president of Institute of Chartered Accountants of India (ICAI).

Besides, what may have aided the overall strong growth of corporate income in FY21 is the statistical effect of the dismal performance of the previous financial year. Data from CBDT shows that in FY20, the year which ended with the initial few days of the national lockdown meant to fight back the pandemic, gross corporate income had seen an annual contraction of 2.1% at 16.6 trillion.

In the case of personal income tax, 63.6 million people filed their tax returns in assessment year 2021-22, up from 60.2 million in the assessment year 2020-21. The gross income before deductions reported by individuals for FY21 is 44.6 trillion, 7.6% more than the gross income reported for the previous year.

However, this does not give an indication about the pandemic’s impact on those not filing tax returns. In FY21, the overall income of businesses and individuals had grown by over 14% to 69 trillion, data showed.

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Updated: 16 Oct 2023, 11:46 PM IST

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