Net Direct Tax Collection Falls Nearly 4% to ₹6.64 Lakh Crore in FY26 on Higher Refunds

India’s net direct tax collection for the current financial year 2025–26 has registered a 3.95% decline, primarily due to a significant increase in refunds issued to taxpayers, as per the data released by the government on August 12, 2025.

Understanding Direct Taxes

Direct tax refers to taxes paid directly by individuals, companies, and other entities on their income and profits. It includes:

• Corporate tax (paid by companies)
• Personal income tax (paid by individuals, Hindu Undivided Families (HUFs), and firms)
• Securities Transaction Tax (STT) on the sale and purchase of securities

Breakdown of Collections (April 1 – August 11, 2025)

• Net direct tax collection: ₹6.64 lakh crore (down 3.95% from ₹6.91 lakh crore in FY25 for the same period)
• Net corporate tax collection: ₹2.29 lakh crore
• Net non-corporate tax collection: ₹4.12 lakh crore (includes individuals, HUFs, and firms)
• Securities Transaction Tax (STT) collection: ₹22,362 crore

Impact of Higher Refunds

The decline in net tax collection has been largely attributed to a 10% rise in refunds, which touched ₹1.35 lakh crore so far this fiscal.

Refunds are issued when taxpayers have paid more in advance tax or TDS (Tax Deducted at Source) than their actual tax liability, which lowers the net amount collected by the government.

Gross Tax Collections

Before accounting for refunds, the gross direct tax collection stood at ₹7.99 lakh crore, showing a 1.87% dip compared to ₹8.14 lakh crore in the same period of the previous fiscal year.

Government’s Fiscal Targets for FY26

• Total direct tax target: ₹25.20 lakh crore (a 12.7% increase year-on-year)

• STT target: ₹78,000 crore for the full year. The government expects the growth to be supported by economic expansion, improved compliance, and digital tax administration.

Significance of the Data

While the early months of FY26 have seen a decline in net collections, the increase in refunds reflects the government’s efforts to process returns faster. However, to achieve the ambitious annual target, tax collections will need to pick up pace in the coming quarters.