New Delhi: The Central Board of Direct Taxes (CBDT) has reported a 5.12% year on year rise in net direct tax collections for the financial year 2025-26 at ₹23.40 crore, but it still hasn’t met the government’s revised target of ₹24.21 crore. Earlier announcements by Finance Minister Nirmala Sitharaman had lowered the income tax rebates to ₹12 lakh effective April 1,2025 from ₹7 lakh earlier. This was aimed at boosting consumption with further across the board changes in tax rates and a hiked standard deduction to ₹75,000.

Despite this, the Income Tax department has successfully optimized its tax refund protocols by reducing the total refund outflows to ₹4.71 lakh crore in FY26 as against ₹4.76 lakh crore in the previous year. The I-T department has deployed predictive risk assessment algorithms to help tax officers quickly spot violations, besides clearing tax returns, while holding questionable deduction claims through auditing and preventing large-scale revenue leakage. 

While the final figures have closed below expectations, early high-frequency indicators have shown how corporate tax filings have performed exceptionally well, rising from ₹2.48 lakh crore to ₹2.76 lakh crore this time, while non-corporate tax collections, including those by individuals, HUFs, firms, and other entities, have increased from ₹2.80 lakh crore to ₹3.14 lakh crore this time.

Though this shortfall raises concerns about the sustainability of overall revenue growth, external geopolitical factors can have a spillover effect on tax collections, with the ongoing war in the Middle East affecting inflation, global trade, and commodity prices, which could affect tax revenues indirectly.

Abizar has been writing before AI started to take over your lives! His expertise lies in analysing diverse perspectives and simplifying them for laymen. Beyond writing, storytelling and editing, he enjoys running, learning and enjoying the outdoors.

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