The Indian government's net direct tax collection for the current financial year has shown steady growth, though it has fallen short of initial projections. Official data reveals that after adjusting for refunds, the total mop-up for the period from 1 April to 17 December stood at ₹17 trillion, marking an 8% increase compared to the same period last year.
Corporate vs. Personal Income Tax: A Diverging Trend
The growth was notably slower than the 13% year-on-year increase that had been projected. A key reason for this moderation is the relief provided to individual taxpayers. The data, released by the Central Board of Direct Taxes (CBDT) on Friday, indicates that collections from corporations and individuals together account for roughly two-thirds of the full-year target of ₹25.2 trillion.
Breaking down the numbers, corporate tax payments, net of refunds, amounted to a little over ₹8.17 trillion, registering a healthy growth of 10.5%. This aligns with the growth rate anticipated in the Union Budget for FY26, which was presented on 1 February.
In contrast, personal income tax collections, after refunds, came in at about ₹8.47 trillion. While this represents a 6.4% annual growth, it is significantly slower than the 14.4% growth that was projected for the year. This slowdown is directly attributed to the government's budget move to lower personal income tax slab rates and offer a rebate for individuals with income up to ₹12 lakh (₹12.75 lakh for salaried individuals), aimed at boosting household finances.
Refunds Decline and Advance Tax Insights
An important factor supporting the net collection figure is a reduction in refunds issued. The tax department issued refunds worth ₹2.97 trillion so far this fiscal, which is 13.5% lower than the amount refunded during the same period last year. Officials link this reduction to the rationalization of Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) rules in recent budgets.
At a gross level, corporate tax collection grew by 7.5%, while non-corporate tax, primarily individual income tax, saw a modest 1.3% annual growth. The government also collected ₹40,195 crore in Securities Transaction Tax (STT), slightly above last year's level.
Commenting on the figures, Anita Basrur, partner at chartered accountancy firm Sudit K. Parekh & Co. LLP, noted that the 8% net growth was "mainly on account of reduction in refund disbursals." She further highlighted a divergence in advance tax payments: "The net advance tax collection for the year has grown by 4.27%. This mainly is on account of increased advance tax payments by corporations which is almost 8% as against a reduction in advance tax by non-corporate persons which has fallen by 6.5%."
Path to Meeting the Annual Target
Despite the slower-than-expected growth in personal income tax, the government remains optimistic about achieving its annual direct tax collection target. CBDT chairman Ravi Agrawal, on 17 November, stated that the income tax department is actively engaging with taxpayers to encourage voluntary compliance where gaps are detected in tax returns.
The department is conducting outreach programs to promote this voluntary compliance. With these efforts and the traditional surge in collections in the last quarter of the financial year, the exchequer hopes to bridge the gap and meet the ₹25.2 trillion target by 31 March.
