Net direct tax collection drops by 1.39% to Rs 4.58 trillion so far in FY26

This was on the back of higher refunds, income tax relaxation provided to salaried individuals and the impact of increased capital expenditure by companies

Net direct tax collections till June 19 in the financial year 2025-26 (FY26) dipped by 1.39 per cent year-on-year to Rs 4.58 trillion, due to higher refunds, income tax relaxation provided to salaried individuals and the impact of increased capital expenditure by companies. Of this, non-corporate tax - which includes taxes paid by individuals, Hindu Undivided Families, firms, bodies of individuals, associations of persons, local authorities, and artificial juridical person - grew marginally by 0.71 per cent on yearly basis to Rs 2.72 trillion during the same period. 

 

Net corporate tax during the same period declined by 5.13 per cent to Rs 1.72 trillion, while securities transactions tax (STT) increased by 12.13 per cent to Rs 13,013 crore, according to the data. 

 

 

According to Samir Kanabar, tax partner with EY, the marginal dip in net tax collections is majorly due to tax relaxation given to salaried class in the Union Budget 2025. “Since individuals are paying less tax, the government is receiving lower Tax Deducted at Source (TDS) from salaries. On the corporate side, the fall in tax collection is partly because companies are getting large refunds and also because many of them have made big Capex investments," said Kanabar.  

 

"When businesses spend on setting up factories, buying machinery, or expanding operations, they get tax deductions under the Income Tax Act, which reduces their taxable income and ultimately lowers the Corporate Income Tax they pay,” he added. 

 

Gross direct tax collections increased by 4.86 per cent year-on-year to Rs 5.45 trillion, while refunds rose significantly by 58.04 per cent to Rs 86,385 crore during the same period. Of the total refund, major chunk comprised of corporate refunds totalling Rs 76,832.08 crore which grew by 67.31 per cent. According to experts, this refund relates to past years which may have been cleared now. 

 

Of the total gross direct tax, corporate tax amounted to Rs 2.49 trillion, non-corporate tax contributed Rs 2.82 trillion , STT totalled Rs 13,013 crore and other taxes stood at Rs 259.61 crore.

 

"The growth in corporate tax collections appears to be broadly in line with expected profit growth. In the case of non-corporates, collections may have been impacted by lower bonus payouts and modest salary increments. As for refunds, these likely pertain to previous assessment years and may simply reflect bunching of processing activity towards the end of the first quarter," said Madan Sabnavis, chief economist at Bank of Baroda.  

 

Meanwhile, advance tax collections registered a moderate growth of 3.87 per cent in the first quarter of FY26. This is in comparison to last year's year-on-year growth of 27.34 per cent. Advance tax is paid by individuals and businesses in four installments within specific dues dates - June 15, September 15, December 15 and March 15. The non-corporate advance tax decreased by 2.68 per cent on year to Rs 33,928.32 crore till June 19, in FY26, while corporate advance tax rose by 5.86 per cent to Rs 1.21 trillion during the same period. 

 

The Centre is estimated to collect Rs 25.2 trillion as direct taxes in FY26. Net direct tax collection in FY25 grew at 13.57 per cent to Rs 22.26 trillion, exceeding the initial budgeted target of Rs 22.07 trillion.