India’s net direct tax collections for FY26 (as of July 10) declined 1.34% year-on-year to ₹5.63 lakh crore, despite gross collections rising 3.17%. The fall is due to a 38% surge in refunds, exceeding ₹1 lakh crore. Both corporate and personal income tax saw marginal declines in net terms.India’s net direct tax collections for FY 2025–26 (as of July 10) fell 1.34% year-on-year, led by a sharp rise in tax refunds that outpaced growth in gross inflows. Both net corporate and personal income tax collections registered marginal declines — reversing the upward trend seen over the past two years.
Net direct tax mop-up stood at ₹5,62,827 crore, down from ₹5,70,483 crore in the same period last year, even as gross collections rose 3.17% to ₹6,64,807 crore.
The main driver was a 38% year-on-year increase in refunds, which crossed ₹1 lakh crore. The government has been focusing on quicker refund settlements.“The decline in net direct tax collections is primarily due to a rise in the volume of tax refunds processed. This reflects the government’s focus on improving taxpayer services,” said Gouri Puri, Partner at Shardul Amarchand Mangaldas & Co.Samir Kanabar, Tax Partner, EY India said, “While fall in net direct tax collection is largely driven by an increase in refunds issued this year, the overall fall in direct taxes can be explained by two major factors…”Decline across key net tax heads
Net Corporate Tax: ₹1,99,910 crore (↓ 3.67%)
Net Personal Income Tax: ₹3,44,773 crore (↓ 0.04%)
Net STT: ₹17,874 crore (↑ 7.46%)
Net Other Taxes: ₹270 crore (↓ 80.83%)
Three-year net direct tax collection trend (as of July 10)
YearCollections (₹ Cr)YoY ChangeFY23₹4,87,016—FY24₹5,70,483↑ 17.1%FY25₹5,62,827↓ 1.34%
Refunds surge, curbing net revenuesTotal refunds issued: ₹1,01,980 crore
Corporate refunds: ₹89,863 crore (↑ 56.86%)
Non-Corporate refunds: ₹12,114 crore (↓ 26.96%)
Other refunds: ₹3 crore (↓ 80%)
STT refunds: Nil (unchanged)
Refunds have more than doubled over two years — from ₹49,403 crore in FY23 to over ₹1 lakh crore in FY26.Gross collections still show resilience
Tax CategoryFY26 (₹ Cr)FY25 (₹ Cr)YoY ChangeGross Total₹6,64,807₹6,44,375↑ 3.17%Corporate Tax₹2,89,773₹2,64,816↑ 9.42%Non-Corporate Tax₹3,56,887₹3,61,505↓ 1.28%STT₹17,874₹16,632↑ 7.46%Other Taxes₹273₹1,422↓ 80.80%
Fiscal implications & policy outlookThe sharp increase in refunds presents a challenge for short-term fiscal planning ahead of the Union Budget. Experts recommend expanding the tax base, ensuring timely advance payments, and addressing leakages, while maintaining taxpayer service reforms.Net collections may recover later in the year as refund activity stabilises and advance tax inflows increase.(Edited by : Akanksha Upadhyay)
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