Personal Income Tax Collection Drops 4% in Q1 FY26 Despite Corporate Gains: Check Details Here!

India’s direct tax collections for the first quarter of FY 2025-26 grew by only 3.6%, a sharp drop from the strong 27% growth seen in the same quarter last year. As of June 16, 2025, the Centre collected ₹1,54,126 crore in advance taxes, compared to ₹1,48,823 crore in the previous year. 

What is Behind the Reduced Tax Collection Numbers?  

This slow growth is mainly due to tax reliefs announced in the Union Budget. The income tax exemption limit was increased from ₹7 lakh to ₹12 lakh under the new tax regime. These changes were made to help people spend and invest more, with the government expecting to leave ₹1 lakh crore in the hands of taxpayers. 

As a result, advance tax paid by personal income taxpayers fell 4% to ₹32,971 crore. In contrast, corporate advance tax increased by 6% to ₹1.21 lakh crore. Last year, both personal and corporate advance taxes grew at much higher rates—46% and 24%, respectively. 

Overall Tax Collections and Refunds 

Total direct tax collections fell 1.5% to ₹4.56 lakh crore as of June 16, 2025. Corporate tax receipts dropped by 5.1% to ₹1.72 lakh crore. Meanwhile, post-refund income tax collections showed only 1% growth, reaching ₹2.84 lakh crore. 

Refunds grew sharply by 61% year-on-year to ₹85,675 crore, as the government worked to clear pending refunds and fix system issues. 

Will the Government Meet Its Tax Collection Target?  

Advance tax collections reflect the expected earnings of individuals and businesses. Taxpayers must pay 15% of their annual tax by June 15, 45% by September 15, and 75% by December 15. 

With only a modest start, there are worries that total tax collections for FY26 may fall short of the government’s target of ₹25.2 lakh crore—a 13.2% growth from last year’s ₹22.26 lakh crore. The upcoming quarters will paint a better picture.  

Read more: ITR Filing 2025: Here’s Why You Must Declare F&O Losses  

Conclusion 

 While corporate profits remain stable, the government’s tax reliefs and rising refunds are slowing tax inflows. To stay on track, stronger earnings and improved collections in the coming quarters will be essential. 

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