Tax collections of the central government have remained under pressure in the ongoing financial year 2025–26, with growth significantly lower than the levels projected in the Union Budget, according to a report by CareEdge Ratings.
The report shows that gross tax collections increased by just 3.3 per cent year-on-year during the first eight months of FY26, far below the budgeted growth estimate of 12.5 per cent. The muted performance indicates slower-than-expected revenue mobilisation in the current fiscal year.
Direct tax collections have lagged behind projections, with both corporate tax and income tax growth falling short of budget expectations. Corporate tax collections recorded a growth of 7.8 per cent, compared to the budgeted growth of 9.7 per cent, while income tax collections rose by 6.8 per cent, sharply lower than the projected 21.6 per cent growth.
Indirect tax collections have also remained weak. Goods and Services Tax collections declined by 2.0 per cent during the April to November period, partly due to the GST rate rationalisation implemented in late September, which impacted short-term revenues.
Despite the subdued performance so far, the report noted some improvement in direct tax collections in recent months. Looking ahead, CareEdge Ratings expects a recovery in tax revenues in the next financial year. Gross tax revenue is projected to rise to ₹43.5 trillion in FY27, reflecting a growth of 9.6 per cent, while net tax revenue is expected to reach ₹28.9 trillion.
The report added that tax buoyancy is likely to improve in FY27, indicating a closer alignment between tax growth and nominal GDP expansion.