Why India's direct tax collections slipped in Q1 FY26
What's the story
India's net direct tax collections for the first quarter of FY 2025-26, up to June 19, stood at ₹4.59 lakh crore. This is a slight decline of 1.39% from the ₹4.65 lakh crore collected during the same period last year, according to official data released today. The decline is mainly due to slower growth in advance tax collections, especially from corporates, and a sharp rise in refunds.
Trends
Advance tax growth slows down significantly
Advance tax, paid by businesses and individuals on projected income, grew by just 3.87% to ₹1.56 lakh crore between April 1 and June 19 this year. This is a far cry from the 27% growth witnessed during the same period last year. Corporate advance tax collections jumped by 5.86% to ₹1.22 lakh crore while non-corporate advance tax collections fell by 2.68% to ₹33,928 crore during this period.
Performance
Corporate tax collections down by over 5%
Overall corporate tax collections stood at some ₹1.73 lakh crore, down by over 5% year-on-year. This indicates the impact of weaker profit margins or tax optimization strategies employed by firms. However, non-corporate tax collections (mainly personal income tax) saw a marginal increase of 0.7%, totaling ₹2.73 lakh crore during this period.
Tax details
Rise in refunds impacts net direct tax collections
Securities Transaction Tax (STT) on stock market trades rose by 12% to ₹13,013 crore during this period. Gross direct tax collections (before refunds) stood at ₹5.45 lakh crore, which is up 4.86% from last year. However, the difference between gross and net figures is mainly due to a sharp rise in refunds issued this fiscal year so far, which increased by 58%, totaling ₹86,385 crore.
Future projections
Centre's FY26 direct tax collection target
For the current fiscal year (2025-26), the government has estimated its direct tax collections at ₹25.20 lakh crore, a 12.7% increase year-on-year. The government has collected 18.21% of its direct tax target till June 19 this year. It plans to collect ₹78,000 crore from STT in FY26, highlighting its focus on maintaining robust revenue streams despite recent trends in net and advance tax collections.