Early advance tax payers have shown a significant increase in the advance tax paid. Is this a proof of a healthy economy?
Some of the Blue Chip companies have shown a significant increase in Advance Tax payments for the December quarter.
Reliance Industries tops the list. It has paid an advance tax of Rs. 1,000 Crores for this quarter compared to Rs. 444 Crores for the October quarter this year.
ICICI Bank has paid an advance tax of Rs. 500 Crores for this quarter compared to Rs. 250 Crores for the previous quarter. State Bank of India (SBI) has paid an advance tax of Rs. 1,090 Crores for this quarter compared to Rs. 865 Crores for the previous quarter.
What does this mean for you?
An increase in advance tax payment relates directly to an increase in profits, because advance tax is paid as a portion of anticipated profit for the period. Thus, the advance tax figures can be taken as an early indicator of the results to be declared by companies for the quarter.
The increase in advance tax paid for this quarter compared to the previous quarter means that these companies should come out with a proportionate increase in their profit when they declare their results.
This shows that the companies are not only growing at a rapid pace, but are also growing profitably.
The current valuation of the Indian stock markets assumes a high growth for Indian companies, and this growth in advance tax payment vindicates this assumption.