Trump Tariffs Impact: Corporate Tax Collections Growth To Slow In Q1 FY26—NDTV Profit Exclusive

Corporate tax collections in the first quarter of fiscal 2025-26 are expected to slow due to ongoing tariff uncertainty and a volatile global market, according to a government official.

Export-focused companies, many of which are among the top corporate taxpayers, may see a reduction in margins, which would affect overall corporate tax receipts, a finance ministry official told NDTV Profit.

Corporate advance tax grew by 2% in the fourth quarter of the previous fiscal, marking a slowdown compared to earlier quarters. By mid-March, corporate tax collections had risen by only 12.5%, down from 16.71% growth in December, highlighting rising pressure on the corporate sector.

The government aims to achieve gross tax revenue of Rs 42.70 lakh crore in the current fiscal, representing an 11% increase from the revised target of Rs 38.53 lakh crore for the previous fiscal. Of this, the target for direct taxes is Rs 25.20 lakh crore, while indirect taxes are projected at Rs 17.50 lakh crore.

Income tax collections are expected to grow by 14.4% to Rs 14.38 lakh crore, while corporate tax collections are projected to increase by 10.4% to Rs 10.82 lakh crore in the ongoing fiscal.

Narrow Collection Miss

Direct tax collections for the previous fiscal are expected to fall short by Rs 10,000 crore to Rs 15,000 crore, according to officials.

The shortfall is likely to be offset by strong non-corporate tax receipts, particularly from personal income tax. While growth in corporate tax slows, personal income tax continues to support overall tax collection, keeping fiscal targets close to projections.

Revised estimates place total direct tax receipts at Rs 22.37 lakh crore, slightly above the Budget target of Rs 22.07 lakh crore for FY25. However, the corporate tax target has been lowered to Rs 9.80 lakh crore, down from the earlier estimate of Rs 10.20 lakh crore for the fiscal.

As of March 16, the government had collected Rs 9.69 lakh crore in corporate taxes, marking a 7.1% increase from the previous year. Non-corporate tax revenue, which includes individuals, Hindu Undivided Families and firms, rose by 17.5% to Rs 11.01 lakh crore, compared to Rs 9.37 lakh crore during the same period last year.

Securities Transaction Tax collections rose 56% to Rs 53,095 crore, supported by activity in equities, derivatives and equity-oriented mutual funds. STT rates range from 0.001% to 0.2%, with delivery-based equity transactions taxed at 0.1%.