India's direct tax landscape has witnessed a significant shift in the current fiscal year, with corporate tax collections outpacing the mop-up from personal income tax. The overall gross direct tax kitty has swelled past the crucial Rs 20 lakh crore mark, though the growth rate has been tempered by slower personal tax growth.
Corporate vs. Non-Corporate: A Diverging Trend
According to the latest data released by the Income Tax Department, covering the period up to December 17, corporation tax collections have risen to Rs 9.94 lakh crore. This represents a robust year-on-year growth of 7.5%. In contrast, the non-corporate tax collection, which primarily comprises personal income tax, stood at Rs 9.67 lakh crore, registering a much slower growth of just 1.3%.
This dynamic has pulled down the overall growth rate of gross direct tax collections to 4.2% for this period. The figures have become clearer following the third instalment of advance tax payments, which revealed a stark contrast in performance between the two segments.
Advance Tax Payments Signal Underlying Trends
The advance tax data provides deeper insight into the health of the economy. Corporate advance tax payments saw an 8% increase, reaching a little under Rs 6.1 lakh crore. Conversely, non-corporate advance tax payments experienced a decline of 6.5%, falling to Rs 1.8 lakh crore.
Experts point to specific policy measures to explain this divergence. Rohinton Sidhwa, partner at Deloitte India, noted, "Overall, the corporate advance tax increase signals good corporate earnings. Non-corporate advance tax collections have declined, possibly on the back of rate cuts for individuals given in the previous Budget."
Refunds Dip and Future Projections
Another notable development is a sharp fall in tax refunds issued by the government. Refunds have decreased by 13.5% to a little under Rs 3 lakh crore. This reduction has contributed to a stronger rise in net direct tax collections, which have grown by 8% to over Rs 17 lakh crore.
However, this presents a mixed picture for the remainder of the financial year. Aditi Nayar, chief economist at ICRA, highlighted a potential challenge: "A pickup in refunds would weigh on the growth in net non-corporate tax collections in the remaining part of the fiscal. Overall, ICRA expects a sizeable miss in Personal Income Tax (PIT) collections relative to the FY2026 Budget target of Rs 13.6 lakh crore."
The data underscores a resilient corporate sector but also points to a potential shortfall in personal tax revenues against government estimates, setting the stage for a crucial final quarter for tax collections.
