India FY26 Gross Tax Collections Seen Missing Budget Target By ₹3 Lakh Crore

India’s gross tax collections in FY26 are expected to fall short of the budgeted target by about ₹3 lakh crore, according to a fiscal outlook report by CareEdge Ratings. The report said gross tax collections rose just 3.3% year-on-year in the first 8 months of FY26.

It linked the slower pace to weaker trends in parts of the tax mix rather than a broad-based slowdown across all heads. The shortfall estimate frames the remainder of FY26 as a period where tax performance and other receipts both matter for the overall fiscal arithmetic.

Indirect Taxes Weaken After GST Rate Rationalisation

CareEdge attributed the weakness in tax collections largely to indirect taxes. GST collections contracted 2% during April–November FY26 after rate rationalisation was implemented in September.

Customs duty collections also declined during the same period, adding to the pressure on indirect tax revenues. Union excise duties, however, recorded healthy growth, providing some support to overall indirect tax receipts even as other components weakened.

Non-Tax Revenue Growth Offsets Part of The Tax Shortfall

The tax shortfall has been partly offset by a sharp rise in non-tax revenue, which increased 20.9% during April–November FY26. The increase was supported by higher-than-expected dividend transfers from the Reserve Bank of India.

Disinvestment proceeds remained subdued at ₹49 billion against a budgeted ₹470 billion, indicating a large gap versus the annual plan. The update also noted that key stake sales are likely to spill over into FY27 based on the current pace of disinvestment receipts.

Expenditure Mix Shows Muted Revenue Spend and Higher Capex

On the expenditure side, revenue spending growth remained muted at 1.8% in the first 8 months of FY26. Capital expenditure rose 28.2% over the same period, reaching nearly 59% of the annual target.

CareEdge expects the Centre to meet its FY26 capex target of ₹11.2 trillion. It also said capital expenditure is projected to rise to ₹12.3 trillion in FY27, with a capex-to-revex ratio of around 0.3.

Read More: India’s Core Infrastructure Industries Grow 3.7% in December 2025.

Conclusion

CareEdge’s FY26 outlook points to a likely gap of about ₹3 lakh crore against the budgeted gross tax collection target after 3.3% growth in April–November FY26. The reported weakness is concentrated in indirect taxes, with GST down 2% and customs duties also lower, while excise duties provided partial support.

Direct taxes are described as relatively resilient. Strong non-tax revenue growth of 20.9% has helped offset part of the shortfall, even as disinvestment receipts remain far below the budgeted level.

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