India's net direct tax collections for FY26 grew 18.2% year-on-year to Rs 23.4 lakh crore, exceeding the revised budget estimate of Rs 22.2 lakh crore by Rs 1.2 lakh crore. Personal income tax collections surged 21.4% to Rs 12.1 lakh crore, reflecting rising wage levels in the formal sector, higher capital gains tax from the buoyant equity and property markets, and improved compliance through data-driven enforcement by the Income Tax Department.
Corporate tax collections grew 15.8% to Rs 11.3 lakh crore as Indian companies reported strong profitability for the third consecutive year. The IT, banking and capital goods sectors were the biggest contributors to corporate tax growth. The advance tax collections data, which is seen as a leading indicator of corporate profitability, showed 17% growth in the fourth instalment due in March 2026 — signalling continued earnings momentum heading into FY27.
The buoyant direct tax collections significantly reduced the government's reliance on market borrowings to fund the deficit and provided headroom for higher capital expenditure without compromising the fiscal consolidation roadmap. CBDT chairman said the government would use technology including AI-based tools to further widen the direct tax base by identifying taxpayers not yet filing returns, with the target of reaching 10 crore direct tax filers by FY28.
