Direct tax growth lags budget targets as collections rise 8% till mid-December

India’s net direct tax collections stood at Rs 17.04 lakh crore between April 1 and December 17, registering an 8% rise from the same period of the previous fiscal, according to data released by the Income Tax Department. While collections continued to grow, the pace remains well below the projections made in the Union Budget, pointing to mounting pressure on the government’s revenue arithmetic.

The budget had estimated a 16.1% year-on-year increase in net direct tax collections for the full financial year. With just over three months remaining, the slower growth so far suggests that meeting the target will require a sharp acceleration in the final quarter.

Corporate, personal tax trends diverge

The data show a clear divergence between corporate and non-corporate tax performance. Net corporate tax collections reached Rs 8.17 lakh crore till December 17, up 10.5% from a year earlier. This is slightly ahead of the budget’s expectation of 9.7% growth for the year.

By contrast, net non-corporate tax collections, which include personal income tax and securities transaction tax, stood at Rs 8.47 lakh crore, an increase of 6.37%. This is far below the budgeted growth of 21.6%, underlining the impact of income tax relief measures and softer nominal income growth.

Advance tax collections after the third instalment totalled Rs 7.88 lakh crore during the period, compared with Rs 7.56 lakh crore a year earlier, indicating moderate improvement in underlying tax compliance but not enough to offset the broader shortfall.

Refunds, gross collections, fiscal implications

Refunds issued between April 1 and December 17 amounted to Rs 2.97 lakh crore, down 13.52% from the corresponding period of the previous fiscal, when refunds stood at Rs 3.43 lakh crore. Lower refunds have provided some support to net collections, but gross direct tax receipts still rose only 4.16% on year to Rs 20.02 lakh crore.

From a fiscal perspective, the numbers highlight growing constraints. The budget had projected total direct tax collections of Rs 25.20 lakh crore from corporate tax and taxes on income. With Rs 17.05 lakh crore already collected, the government needs to mobilise about Rs 8.15 lakh crore in the final quarter to meet its target.

Economists warn that this may prove difficult amid multiple headwinds, including GST rate reductions, lower nominal GDP growth, personal income tax cuts and weak disinvestment proceeds. Union Bank of India has estimated the revenue shortfall for the year at around Rs 53,000 crore. Nomura Global Markets Research has separately assessed the overall revenue loss from GST-related measures at about Rs 24,000 crore, or roughly 0.07% of GDP, with the fiscal impact on the central government seen as relatively modest but persistent.

Together, these trends suggest that while direct tax collections continue to rise, the gap between budget assumptions and on-ground performance is widening, leaving limited room for fiscal manoeuvre in the closing months of the financial year.