Jump in refunds depresses Centre’s net direct tax revenue

New Delhi: A sharp jump in tax refunds has led to a modest dip in the union government's net tax revenue receipts from corporate and personal income to ₹4.59 trillion so far this year, official data showed. 

The union government’s net direct tax revenue up to 19 June this year contracted 1.4% annually, although, before adjusting for refunds, it recorded 4.9% growth to ₹5.45 trillion, the Central Board of Direct Taxes (CBDT) said on Saturday.

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The Income Tax Department issued ₹86,385 crore of corporate and personal income tax refunds in the period, a 58% jump from the year-ago period. The bulk of it was in the corporate tax component. 

After refunds, non-corporate tax receipt, which mainly comprises personal income tax revenue, stood at ₹2.73 trillion, a slight improvement over the collections in the same period a year ago. 

Net corporate tax revenue of ₹1.73 trillion, on the other hand, clocked a 5% dip from the year-ago period. Before adjusting for refunds, corporate tax collections saw 9.5% growth and non-corporate taxes a near 1 % improvement, CBDT data showed. 

Sluggish growth in personal income tax

Personal income tax collection growth remained sluggish after the government offered tax relief to middle-income earners in the FY26 budget presented on 1 February, which was estimated in the budget to result in revenue erosion of about ₹1 trillion a year. 

The tax relief was offered as a consumption stimulus for the economy which, over time, could result in improved demand for goods and services, income growth and better tax revenue collection. 

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“Refunds have increased by 58.04% as on 19 June compared to corresponding period of last year reflecting better taxpayer services and quicker issuance of refunds,” CBDT said.

In terms of modes of payment, advance tax collection of corporate and non-corporate taxes so far this year stood at ₹1.5 trillion, an improvement of 3.87% from the year-ago period. 

‘Decent growth momentum’

This rise in advance tax collection establishes that companies have experienced decent growth momentum in terms of reportable profits in the first quarter, said Amit Maheshwari, Tax Partner at AKM Global, a tax and consulting firm.

“However, the marginal dip in overall net collections can be attributed to higher tax refunds issued in first quarter of FY26. Overall, the numbers suggest that while the economy is stable, the pace of collections could vary depending on how key sectors perform in the face of global turmoil and how refunds are processed,” said Maheshwari.

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CBDT said securities transaction tax (STT) fetched ₹13,013 crore so far this year, showing 12% annual growth. The rate of STT varies from 0.001% to 0.2% depending on the instrument, with the highest rate being applicable on shares being listed as part of an initial offer. It works like a tax collected at source, and gives the government information about market transactions.