India’s direct tax collections grew 5.12% year-on-year to Rs 23.40 lakh crore in FY26, reflecting steady revenue generation but falling short of the revised target of Rs 24.21 lakh crore set by the government. The shortfall comes after tax relief measures announced in the Union Budget aimed at boosting consumption and disposable income.

Key Highlights

• India’s direct tax collections grow 5.12% to Rs 23.4 lakh crore but miss revised FY26 target.
• Corporate tax growth remains strong while income tax cuts keep personal tax collections largely subdued. 

The government had earlier lowered its collection target from the original Rs 25.20 lakh crore estimate, signalling cautious expectations amid evolving macroeconomic conditions. Despite the miss, overall net direct tax collections indicate resilience in economic activity and compliance trends.

Corporate Tax Drives Growth, Personal Tax Remains Subdued

Growth in direct taxes was largely supported by strong corporate tax collections, which rose 11.4% to Rs 10.99 lakh crore, reflecting improved corporate profitability and compliance. In contrast, non-corporate tax collections - including personal income tax - remained largely flat, impacted by income tax relief measures introduced in the Budget.

Gross direct tax collections stood at Rs 28.12 lakh crore, up 4.03% year-on-year, while refunds declined marginally by 1.09% to Rs 4.71 lakh crore, supporting net revenue growth.

The moderation in collections follows policy measures such as increased income tax rebates, revised tax slabs, and a higher standard deduction introduced to boost consumption by increasing disposable income. While these steps supported demand, they also limited the pace of growth in personal tax collections.

Also Read: India GST Collections Hit Record Rs 2.43 Lakh Crore in April 2026

Commenting on the trend, EY India Tax Partner Jayesh Sanghvi noted, "Personal tax collections were expected to be impacted due to rate cuts while healthy corporate tax growth and refund management have supported overall growth at 5.12%.”

Deloitte India Partner Rohinton Sidhwa highlighted the resilience in collections, “Non-corporate tax revenues have sustained despite significant rate cuts, reflecting growth in taxpayer base and volumes.”

Stable Growth with Structural Shifts

Looking ahead, direct tax collections are expected to remain stable, supported by formalization of the economy, improved compliance, and steady corporate earnings. However, the impact of tax rationalization measures and global uncertainties may continue to influence revenue growth in the near term.

Overall, FY26 tax data reflects a balancing act between fiscal support for consumption and maintaining revenue momentum, with corporate performance emerging as a key pillar of growth.