Advance Tax Growth Slows To 4% In Q1 FY26, Net Direct Tax Collection Dips 1.3%

The first installment of advance tax for financial year 2025–26 registered a modest 4% growth, sharply down from the over 27% rise seen in the same period last year, according to data from the Income Tax Department.

The slowdown is primarily attributed to a dip in collections from non-corporate taxpayers, which stood at around Rs 34,000 crore as of June 19—slightly lower than Rs 35,000 crore collected in the corresponding period of FY25. In contrast, corporate tax collections rose to Rs 1.22 lakh crore from Rs 1.15 lakh crore year-on-year.

As a result of the tepid growth in advance tax and a surge in refunds, net direct tax collections have declined by over 1.3% so far this fiscal. The collection stood at Rs 4.59 lakh crore as of June 19, as compared to Rs 4.65 lakh crore in the same period last year.

The tax department noted that refunds have jumped 58.04% compared to the year-ago period, citing improved taxpayer services and faster processing as key reasons. The refunds stood at Rs 86,385 crore, as against Rs 54,661 crore in the same period of the previous fiscal.

Before adjusting the refunds, the tax collection on a gross basis stood at Rs 5.45 lakh crore till June 19 of this fiscal, up 4.86% as compared to Rs 5.2 lakh crore in the corresponding period of FY25.

Total advance tax collections rose by 3.87% to Rs 1,55,533 crore. While corporate advance tax increased by 5.86% to Rs 1,21,604 crore, non-corporate advance tax declined by 2.68%, settling at Rs 33,928 crore.

Notably, direct taxes are crucial for the government's finances, and are collected through various means such as capital gains tax, wealth tax, gift tax, security transaction tax, income tax, property tax, and corporate tax.

The mop-up of direct taxes helps the Centre to narrow its fiscal deficit. For FY26, the government has set a target to trim the deficit to 4.4% from 4.8% in the preceding fiscal year.