- Government may miss FY26 direct tax target by Rs 1.5-2 lakh crore due to slow growth
- Revised Estimate for direct taxes cut by Rs 1 lakh crore to Rs 24.21 lakh crore
- Net direct tax collections rose 9.4% to Rs 19.43 lakh crore as of Feb 10
The government may miss its FY26 direct tax collection target by Rs 1.5–2 lakh crore, as slower corporate tax growth and taxpayer relief measures weigh on overall revenue mobilisation.
The Revised Estimate (RE) for direct taxes has already been trimmed by about Rs 1 lakh crore from the Budget Estimate, bringing the FY26 target down to Rs 24.21 lakh crore. To meet this revised goal, the tax department now needs to mop up roughly Rs 4.77 lakh crore in the remaining weeks of the financial year — a tall order given current trends.
As of Feb. 10, net direct tax collections stood at Rs 19.43 lakh crore, reflecting a 9.4% increase compared with the same period last year.
Gross direct tax collections rose 4.09% year-on-year to Rs 22.78 lakh crore. This comprises gross corporate tax collections of Rs 10.88 lakh crore and gross non-corporate tax collections of Rs 11.39 lakh crore.
Refunds during the period fell sharply by 18.82% to Rs 3.34 lakh crore, which helped lift net collections to Rs 19.43 lakh crore.
While the year-on-year growth suggests steady revenue momentum, the current pace may not be sufficient to fully close the gap to the revised target.
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A significant factor supporting net tax growth this year has been the sharp decline in refunds. Refund issuances fell nearly 19% year-on-year, effectively inflating net collection figures.
Rohinton Sidhwa, Partner at Deloitte India, observed that both corporate and non-corporate taxes are showing relatively subdued growth when measured against budget assumptions.
He pointed out that while the government marginally raised its corporate tax target in the Revised Estimates, it reduced the non-corporate tax target by around 8%. As a result, the improved net collection numbers are largely attributable to lower refunds rather than strong underlying tax expansion.
March Critical For Target
Historically, March sees a spike in tax payments as businesses and individuals finalise accounts and clear advance tax liabilities. A strong last-month push could help improve the overall tally.
However, with corporate earnings growth moderating and tax relief measures reducing the burden on individuals, achieving the Rs 24.21 lakh crore revised target will likely require a substantial surge in March collections.
The final outcome for FY26 will hinge on whether that customary year-end momentum materialises — or whether the fiscal closes with a big margin.
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