Budget 2026: How robust non-tax revenues help the Centre salvage tax shortfall, in charts
Slower nominal GDP growth and tax cuts dented FY26 collections, forcing conservative tax assumptions in Budget 2026, even as strong non-tax revenues gave the Centre breathing room.
The Union Budget presented on Sunday confirms a trend that has been building through FY26: the government is contending with a sizeable tax shortfall in the current fiscal year, as collections fall short of budgeted expectations.
Slower nominal GDP growth in FY26, coupled with revenue foregone from earlier cuts in income tax and the goods and services tax (GST), has squeezed receipts. Against this backdrop, Budget 2026 adopts a more conservative stance on tax projections, pegging gross tax revenue growth at 8% in FY27, down from the 10.8% assumed for FY26.
That caution, however, is partly offset by an unexpectedly strong showing in non-tax revenues, which has given the Centre some fiscal breathing room.
Gross tax revenues, the backbone of government receipts, are estimated to have grown 7.41% year-on-year in FY26, according to revised estimates in the budget documents. At ₹40.78 trillion, collections reached 95.5% of the budget estimate of ₹42.7 trillion, implying a shortfall of nearly ₹2 trillion against the official target.
For FY27, gross tax revenues have been pegged at ₹44.04 trillion.
Direct, indirect mix
Income tax collections, which account for nearly a third in gross tax revenues, have been pegged at ₹14.7 trillion for FY27, a 12% year-on-year growth. Goods and services tax collections – the second biggest head in the tax pie – is pegged at ₹10.2 trillion for FY27, a fall of 2.6% year-on-year compared with FY26 revised estimates.
Excise duties, though, have been a saviour in an otherwise sombre tax environment, with revised estimates for FY26 coming in at ₹3.4 trillion, 106% of budget estimates, and the government pegging the FY27 figure at ₹ 3.9 trillion. Last year, excise duty was hiked on petrol and diesel by ₹2 per litre each, even as retail prices stayed the same.
Nonetheless, a strong performance of non-tax revenues will potentially help the Centre offset the impact of the shortfall. Non-tax revenues have exceeded expectations in FY26. The collections are at nearly 115% of this fiscal’s budget estimates of ₹5.8 trillion.
These revenues though have been pegged at ₹6.7 trillion for FY27, falling 0.2% year-on-year compared to FY26 revised estimates on the back of a high base.
Dividends and profits transferred by public-sector entities remained robust, totalling ₹3.76 trillion in FY26, a year-on-year increase of 21.8%. The Budget FY26 had estimated ₹3.3 trillion in dividend income from the Reserve Bank of India (RBI) and public-sector financial institutions. The FY27 projection of ₹3.91 trillion signals continued optimism on this front.
Disinvestment receipts are seeing green shoots. The government has earned ₹0.34 trillion in disinvestment receipts in FY26. Though this is short of the annual target of ₹0.47 trillion, the figure is nearly double of the amount earned in FY25. With more stake sales lined up, the government has put out optimistic figures for FY27 with disinvestments projected to nearly double to ₹0.8 trillion in FY27.
In FY27, all eyes will be on whether the tax cuts will translate into a pickup in consumption, and stronger GDP growth will help boost tax collections.
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