Net Direct Tax Collection Falls 3.95% to ₹6.64 Trillion in FY26 So Far

The government’s latest data for the current financial year shows a dip in net direct tax collections despite an overall target of ₹25.20 trillion for FY26. This decline is largely attributed to an increase in refunds issued during the April to August period.

Understanding Direct Tax Collections

Direct tax refers to the levy charged directly on the income of individuals, companies, professionals, and other entities. It includes corporate tax, personal income tax, and the Securities Transaction Tax (STT) collected on market transactions. These taxes form a significant portion of the government’s revenue, making their trends a key indicator of fiscal health.

Net Collections for FY26 So Far

From April 1 to August 11 in FY26, the net direct tax collection stood at ₹6.64 trillion, marking a 3.95% decline from ₹6.91 trillion during the same period in FY25. This fall is primarily due to a surge in refunds, which rose 10% to ₹1.35 trillion in the period under review.

Corporate and Non-Corporate Tax Breakup

The net corporate tax collection reached about ₹2.29 trillion, while non-corporate tax—covering individuals, Hindu Undivided Families (HUFs), and firms—totalled ₹4.12 trillion. This distribution reflects the balance between contributions from large corporations and individual taxpayers in the overall tax structure.

Performance of Securities Transaction Tax

The STT mop-up for the period between April 1 and August 11 stood at ₹22,362 crore. This is part of the government’s broader plan to collect ₹78,000 crore from STT during FY26, signalling the importance of market-based taxation in the overall revenue mix.

Gross Collections Before Refunds

Before accounting for refunds, gross direct tax collections stood at ₹7.99 trillion in the current fiscal so far, which is a 1.87% dip compared to ₹8.14 trillion in the corresponding period of the previous fiscal year. This decline, although modest, points to the challenges in revenue growth despite higher collection targets.

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Government’s Collection Target for FY26

For FY26, the government has set an ambitious direct tax collection target of ₹25.20 trillion, representing a 12.7% increase compared to the previous year. Achieving this will depend on economic growth, corporate profitability, personal income trends, and the pace of capital market activity.

Conclusion 

The fall in net direct tax collections this fiscal highlights the impact of higher refunds on government revenues. Sustained growth will depend on economic performance and taxpayer compliance.

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