Net Direct Tax Collections Drop 1.39% Despite Gross Growth - Here’s Why

India’s gross direct tax collections for the financial year 2025-26 grew by 4.86%, reaching Rs 5.45 lakh crore as of June 19, according to data released by the Income Tax Department. This marks an increase from the Rs 5.19 lakh crore collected during the same period last year.

Net Collections Take a Hit Due to Soaring Refunds
Despite the rise in gross receipts, net direct tax collections fell marginally by 1.39% to Rs 4.59 lakh crore. The decline is attributed to a substantial 58% jump in refunds, which officials say is a result of improved taxpayer services and quicker processing.

Advance Tax Trends: Corporate Tax Gains, Non-Corporate Lags
Advance tax collections for the period amounted to Rs 1.56 lakh crore, up 3.87% year-on-year.

This growth was primarily driven by corporate taxpayers, whose contributions rose by 5.86%. However, non-corporate advance tax payments fell by 2.68%, indicating a slight drag from individual and small business taxpayers.

STT Dips, e-Pay Tax Feature Rolled Out
While corporate tax collections remained robust, the Securities Transaction Tax (STT) segment recorded a decline, hinting at moderated market activity or strategic portfolio adjustments by traders.

In a bid to enhance digital convenience, the Income Tax Department has launched a new feature called ‘e-Pay Tax’ on its portal, streamlining the payment process for taxpayers.

Upcoming Reforms: New Tax Code Under Review
Looking ahead, India’s tax landscape is set for significant reform. In the July 2024 Union Budget, Finance Minister Nirmala Sitharaman proposed a full-scale review of the Income-tax Act, 1961, aiming to create a concise and clear tax code to reduce litigation and enhance compliance.

A revised tax structure ensures individuals earning up to Rs 12 lakh have zero tax liability, thanks to a higher rebate of Rs 60,000, the Finance Minister had said during her budget speech.
The new Income Tax Bill 2025 is currently under review by a Select Committee, with discussions scheduled for the Monsoon Session of Parliament. The government had earlier invited stakeholder feedback on the draft bill, introduced on March 18, 2025.

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