Net direct tax collections rise by 8% till Dec 17, refunds down 13.5%: Income Tax Dept

Tax experts said that holding back refunds will give rise to higher litigation. Rohinton Sidhwa, Partner, Deloitte India, said, “The drop in refunds is being attributed to a higher amount of screening of any fraudulent refund claims. Holding back refunds also accelerates litigation that the tax department can ill afford.”

Overall, at gross level, direct tax collections grew 4.16 per cent to Rs 20.02 lakh crore during April 1-December 17. In the year-ago period, gross direct tax collections had stood at Rs 19.22 lakh crore.

Advance tax, STT

With December being the month for the third installment or 75 per cent of tax liability of the tax to be paid in advance for a financial year, the advance tax collections rose by 4.27 per cent to Rs 7.88 lakh crore as on December 17. While corporate advance tax grew 7.98 per cent year-on-year to Rs 6.07 lakh crore during April 1-December 17, non-corporate advance tax was down 6.49 per cent year-on-year to Rs 1.81 lakh crore.

Non-corporate tax includes taxes paid by individuals, HUFs (Hindu Undivided Families), firms, Association of Persons (AoPs), Body of Individuals (BoIs), local authorities, artificial juridical persons.

“Overall the corporate advance tax increase signals good corporate earnings. Non-corporate advance tax collections have, however, declined possibly on the back of rate cuts for individuals given in the budget,” Sidhwa said.

On the securities markets front, Securities Transaction Tax (STT) after having posted a lower year-on-year level last month inched up 0.2 per cent year-on-year to Rs 40,194.77 crore as on December 17 from Rs 40,114.02 crore in the year-ago period. STT is a direct tax levied on purchase and sale of securities listed on the stock exchanges in India.

Fiscal impact

With just over three months remaining for this financial year, the government is likely to see a shortfall in its tax revenue targets. In the Budget 2025-26, direct tax collections were estimated to be Rs 25.20 lakh crore from corporate tax and taxes on income. So far, the Centre has collected Rs 17.05 lakh crore and it needs to collect Rs 8.15 lakh crore in the next three-and-a-half months to meet the Budget target.

Fiscal pressures are significant this year due to the tax reductions under the Goods and Services Tax (GST) regime, along with lower nominal GDP growth, personal income tax cuts and lagging disinvestment proceeds.

Union Bank of India in its latest report said that the fiscal arithmetic shows FY26 revenue shortfall to be around Rs 53,000 crore.

The overall revenue loss on account of GST, as per Nomura Global Markets Research, has been around Rs 24,000 crore or nearly 0.07 per cent of GDP, with the fiscal hit to the Central government in November seen to be modest at around Rs 14,000-15,000 crore or about 0.04 per cent of GDP.