Decrease in direct tax revenue by 3.95% attributed to growth in tax refund issuances
In the recently released data by the Central Board of Direct Taxes (CBDT), India's gross direct tax collections for the financial year 2025-26 have shown a modest increase of 3.2%, reaching Rs 6.64 lakh crore. However, the net direct tax collections have seen a significant drop of 3.95%, primarily due to a decrease in personal income tax collections and a surge in tax refunds issued.
The growth in collections does not include tax refunds, which have already been discussed. In the same period last year, the gross direct tax collections were Rs 6.44 lakh crore. This year, gross direct tax collections before refunds have fallen 1.87% to Rs 7.99 lakh crore.
A closer look at the numbers reveals that non-corporate tax collections, which include personal income tax, have dropped 7.5% to Rs 4.12 lakh crore. On the other hand, corporate tax collections have risen 2.9% to Rs 2.29 lakh crore after refunds. The increase in corporate tax revenues has contributed to an 8% increase in the category of gross direct tax collections before refunds, amounting to Rs 3.33 lakh crore.
The decline in non-corporate tax collections can be attributed to several key factors. The exemption threshold under the new tax regime was increased from ₹7 lakh to ₹12 lakh from FY 2025-26, making income up to ₹12 lakh completely tax-free, which substantially lowered personal income tax collections.
Refunds have also played a significant role in the decline. Refunds rose by 9.81%, from Rs 1,22,895 crore to Rs 1,34,948 crore, reducing the net collections despite gross collections only falling by 1.87%.
It's important to note that "other taxes" have continued to decline, plunging over 80% due to the absence of last year's one-off receipts, as previously mentioned.
Securities Transaction Tax (STT) collections have grown 3.5% to Rs 22,362 crore, offering a glimmer of positivity in the overall tax collection landscape.
As of August 11, the net direct tax collections for FY 2025-26 stand at Rs 6.64 lakh crore. Despite the drop in net collections, the rise in corporate tax revenues and STT receipts has been a silver lining in an otherwise challenging fiscal year.
[1] Central Board of Direct Taxes (CBDT). (2025). Direct Tax Collections for the Financial Year 2025-26. Retrieved from https://www.incometaxindia.gov.in/
[2] Press Trust of India. (2025, August 11). Net direct tax collections down 3.95% in FY 2025-26. The Economic Times. Retrieved from https://economictimes.indiatimes.com/
[3] Ministry of Finance, Government of India. (2025). Budget Speech 2025-26. Retrieved from https://www.finmin.gov.in/
- Despite the decrease in net direct tax collections, the rise in corporate tax revenues and Securities Transaction Tax (STT) receipts, as mentioned in the Economic Times, offers a silver lining in an otherwise challenging fiscal year.
- The decline in non-corporate tax collections can be attributed to several key factors, including the increase in the exemption threshold under the new tax regime and a surge in tax refunds, according to the budget speech 2025-26 by the Ministry of Finance, Government of India.
