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Net direct tax collections for fiscal year 2026 reached Rs 23.40 lakh crore, a 5.12% increase year-on-year. However, this figure fell short of the government's revised estimate of Rs 24.21 lakh crore, resulting in a shortfall of approximately Rs 81,000 crore. Gross direct tax collection for the year was Rs 28.12 lakh crore, a 4.03% increase from the previous fiscal. A marginal 1.09% decline in refunds issued, totaling Rs 4.71 lakh crore, helped to bolster the net collection figure. Corporate tax collections were a key driver, reaching Rs 13.81 lakh crore for FY26, up from Rs 12.72 lakh crore in FY25. This indicates healthy corporate profitability and improved compliance. In contrast, non-corporate tax collections, which include personal income tax, remained largely stable at Rs 13.72 lakh crore, slightly lower than Rs 13.73 lakh crore in FY25. This suggests limited growth in individual income.
Revenue from the Securities Transaction Tax (STT) rose to Rs 57,522 crore in FY26 from Rs 53,296 crore in FY25. This increase reflects strong activity in equity markets with higher trading volumes and sustained retail participation. However, as part of Budget 2026, the government increased STT rates effective April 1, 2026, on futures by 150% (to 0.05%) and on options by up to 50% (to 0.15%). This measure aims to increase transaction costs for derivatives trading.
The government budgeted a fiscal deficit of 4.3% of GDP for FY27, a slight reduction from the revised estimate of 4.4% for FY26. The central government's debt-to-GDP ratio is projected at 55.6% in FY27, down from 56.1% in FY26, with a medium-term target of 50% by 2031. Despite the direct tax revenue miss, indirect tax collections have significantly outperformed expectations, providing significant support.
India's economy is projected to grow between 6.1% and 7.2% in real terms for FY27, with nominal GDP growth estimated at 10%. The S&P BSE Sensex fell 7.06% in FY26, while the Nifty 50 dropped 5.05%. This market downturn, influenced by the West Asia crisis, saw investor wealth decline by Rs 51 lakh crore in March 2026 alone. Analysts forecast the Sensex to range from 90,000 to 107,000 by the end of 2026, with Bank of America projecting the Nifty 50 to reach 29,000 by year-end, driven by earnings growth.
The shortfall in personal income tax collections raises concerns about the sustainability of overall revenue growth. This weakness is partly attributed to tax relief measures introduced to boost consumption. Reliance on corporate tax, sensitive to economic cycles, and STT, linked to market activity, creates fiscal vulnerability. Ongoing geopolitical tensions in West Asia also pose risks to economic stability, potentially affecting commodity prices, inflation, and global trade, which could indirectly impact tax revenues. The stagnation in non-corporate tax collections, contrary to corporate earnings, points to challenges in generating broad-based economic income. Analysts emphasize the need for nominal GDP growth to accelerate beyond current projections to meet debt consolidation targets. While the government is focused on managing the debt-to-GDP ratio, the uneven recovery remains a challenge for fiscal consolidation and ensuring widespread economic prosperity. The impact of increased STT on derivatives trading is also a factor to monitor.