Net direct tax collections rise 16% so far in FY27

New Delhi: India's net direct tax collections rose 16.1% year-on-year to ₹6.51 trillion between 1 April and 13 July, signalling continued resilience in corporate profitability and personal incomes despite growing global uncertainty stemming from the West Asia war.

The higher collections also strengthen the Centre's revenue position in the early months of FY27, giving it greater fiscal room to pursue its budgeted spending plans.

According to official data released by the Income Tax Department on Tuesday, gross direct tax collections increased to ₹7.74 trillion from ₹6.66 trillion in the corresponding period last year.

Refunds issued during the period also rose 14.57% to ₹1.22 trillion, taking net direct tax collections to ₹6.51 trillion, compared with ₹5.59 trillion a year earlier.

The growth was led by both corporate and non-corporate taxes. Gross corporate tax collections rose to ₹3.35 trillion from ₹2.90 trillion a year ago, while gross non-corporate tax collections, which include taxes paid by individuals, Hindu Undivided Families (HUFs), firms and other non-corporate entities, increased to ₹4.12 trillion from ₹3.58 trillion. Securities transaction tax (STT) collections also increased sharply to ₹26,429 crore from ₹17,876 crore during the period, the data showed.

After adjusting for refunds, net corporate tax collections stood at ₹2.40 trillion, while net non-corporate tax collections were ₹3.85 trillion.

The latest numbers suggest that economic activity remained on a firm footing during the first quarter of FY27. Unlike GST collections, which largely reflect consumption and business transactions, direct taxes are linked to corporate profits and personal incomes. Sustained growth in direct tax receipts, therefore, generally indicates healthy earnings, improved tax compliance and continued formalisation of the economy.

The collections also reflect the first advance tax instalments, tax deducted at source (TDS), tax collected at source (TCS), self-assessment tax and regular tax payments made during the initial months of the financial year. Together, these provide one of the earliest indicators of the underlying strength of incomes and business activity.

According to economists, the healthy pace of direct tax collections is expected to provide comfort to the government as it seeks to maintain fiscal discipline while continuing to support capital expenditure and social sector spending.

Stronger direct tax revenues reduce the pressure on the Centre to resort to additional market borrowings to meet its expenditure commitments, said Abhash Kumar, assistant professor of economics at the University of Delhi.

“While overall net collections are up an impressive 16.4% the growth is driven primarily by healthy corporate tax collection growth which on a net basis shows a 22% growth,” said Rohinton Sidhwa, partner, Deloitte India. “This seems to indicate that corporate earnings do not seem to have been hit by the war or a slowdown, and profits seem to be largely insulated. STT also seem to show a healthy increase driven by higher volumes traded due to the volatility on the stock market.”