As the Union Budget for FY2026-27 approaches, tax experts foresee the government adopting a realistic yet cautious approach while setting tax collection targets for 2026-27. For the direct tax collections, the estimates range from Rs 27-29 lakh crore. For the gross tax revenue (GTR), which includes indirect taxes and cesses, a moderate 6-8% growth is predicted over actual FY26 collections.
Deloitte Tax Partner Rohinton Sidhwa noted that while all efforts are being made to meet this year’s direct tax collection target of Rs 25.2 lakh crore, massive rate cuts for individual taxpayers might temper year on year growth in the receipts. However, he said that greater scrutiny prior to refund releases has effectively boosted net collections mid-year.
What does Rohinton Sidhwa suggest?
Looking to FY27, Sidhwa suggested that tax collections are poised to grow briskly once the full impact of the rate cuts are absorbed, but a more conservative budgeted estimate of Rs 27-29 lakh crore would be targeted for FY27.
For FY26, the Centre has pegged a direct collection growth of 13.2% to Rs 25.2 lakh crore compared with Rs 22.26 lakh crore collected in FY25, despite substantial income tax relief in the budget. The slowdown seen is partly attributed to major tax relief measures in the FY26 Budget, including raising the exemption limit under the new regime to Rs 12 lakh and reducing rates across slabs.
What does govt data reflect?
According to the government data, the direct tax collection after refunds between April 1 to December 17 reached at Rs 17.04 lakh crore, a growth of 8% year-on-year. The corporate tax collection was Rs 8.17 lakh crore and the non-corporate tax collection was Rs 8.46 lakh crore.
Mukul Bagla, Chair Direct Tax Committee at PHD Chamber of Commerce and Industry, said FY27 GTR target should be 6-8% over this year’s actual collections. The government has projected Rs 42.7 lakh crore GTR for FY26, a 10.8% increase over the revised estimates for FY25 and 12.5% increase over Rs 37.95 lakh crore provisional collection. Sidhwa underlined that government might miss GTR target for the current fiscal.
Sandeep Sehgal, Partner-Tax at AKM Global, said the government is expected to set slightly higher but realistic targets for FY27, banking on steady corporate tax inflows driven by higher profitability, continued formalisation of the economy, and a gradual rebound in personal income tax.
“The focus is likely to shift toward broadening the tax base, bringing businesses into the system, improving digital reporting, and stabilising overall tax growth without major rate changes. Further, due to recent uptick in GDP growth numbers, it is possible that this may also translate to higher direct tax collections due to increased income,” Sehgal said.
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