Direct tax collections down 4% this fiscal: What's the reason?
What's the story
India's direct tax collections have seen a decline of nearly 4% in the first five months of the current fiscal year (2025-26). The net collection, which includes the corporate tax, non-corporate tax, securities transaction tax, as well as other levies, stood at ₹6.64 lakh crore. This is a drop of 3.95% from ₹6.91 lakh crore during the same period last year, according to data from the Income Tax Department released today.
Refund impact
Increase in refunds
The decline in direct tax collections is largely due to a nearly 10% increase in refunds, which have surged to ₹1.35 lakh crore. This could indicate improved compliance or reduced advance payments from top taxpayers. Non-corporate tax, paid by individuals and smaller firms, also witnessed a decline from ₹4.83 lakh crore last year to ₹4.43 lakh crore this fiscal year.
Tax performance
Corporate taxes on the rise
On the other hand, corporate taxes have increased from ₹3.08 lakh crore last year to ₹3.33 lakh crore this fiscal year. The collections under securities transaction tax also saw a minor increase while those under "other taxes" plummeted sharply from ₹1,636 crore to just ₹283 crore. The government has set a target of collecting ₹25.20 lakh crore in direct taxes for FY26.
Tax strategy
Need for strong double-digit growth
To achieve its tax targets, the government will have to see strong double-digit growth in corporate and personal income taxes. This is necessary to offset weak advance tax collections, high corporate tax refunds, and a delayed personal income tax filing deadline.