Direct Tax Collections Miss Revised Target Despite 5.12 Per Cent Growth In FY26

The central government’s net direct tax collections grew 5.12 per cent year-on-year (YoY) to over Rs 23.40 lakh crore in the financial year 2025-26 (FY26), according to data released by the Central Board of Direct Taxes (CBDT). However, the collections fell short of the revised budget estimate (RE) for the year.

In the RE for FY26, the government had projected total direct tax collections at Rs 24.21 lakh crore. The actual collections were lower by around Rs 81,000 crore, indicating a gap between expectations and realised revenues.

The total increase in collections also decreased as compared to last year's, indicating the moderation of tax buoyancy.

Corporate And Personal Tax Collections

FY26 collections on corporate taxes were slightly lower than the RE of Rs 11.09 lakh crore of corporate taxes. In the meantime, personal income tax (PIT) collections, including Securities Transaction Tax (STT), were at approximately Rs 12.41 lakh crore, short of the projected amount of Rs 13.12 lakh crore.

Both segments contributed to the shortfall, with PIT showing a relatively larger gap compared to estimates.

The combined net direct tax collection for FY26 was Rs 23.40 lakh crore, compared to Rs 22.26 lakh crore collected in FY25.

Gross Collections And Refunds

Gross direct tax collections rose 4.03 per cent year-on-year to about Rs 28.12 lakh crore in FY26. This indicates a modest increase in overall tax inflows before adjusting for refunds.

Refund issuance during the year declined 1.09 per cent to Rs 4.71 lakh crore, compared to the previous financial year. Lower refunds contributed to supporting net collections, although the overall growth remained moderate.

Trends In Revenue Collection

From the above data, it is apparent that although revenue collection was still on the rise in FY26, the rate was rather slow. Both the corporate tax and PIT sectors had some marginal increase, but still could not match the RE forecasts.

Failure to meet the RE forecasts during a period when revenue collection is highly correlated with economic performance, profits, and personal income growth is certainly not encouraging.