New Delhi [India]: According to a report by CareEdge Ratings, the government’s tax collections are anticipated to remain strong in the financial year 2025-26 (FY26), with gross tax revenue projected to grow by 10.4%, slightly surpassing the estimated nominal GDP growth of 10.3%. This growth would result in a tax buoyancy of 1 for the year.
The report suggests that tax collections are expected to stay robust, with gross tax revenue reaching Rs 41.4 trillion and net tax revenue estimated at Rs 28.2 trillion in FY26. While the growth rate is promising, the report also indicates that direct tax collections may rise at a slower pace due to possible income tax relief measures.
Corporate tax collections are expected to see an 11.4% growth, supported by an ongoing recovery in the economic growth. Direct tax revenue as a whole is projected to increase by 9.6%, reaching Rs 23.3 trillion in FY26.
In terms of indirect tax revenue, it is anticipated to grow by 11.9%, bringing in Rs 18.1 trillion. A significant portion of this growth is expected from the Goods and Services Tax (GST), with projections indicating an 11.4% rise to Rs 11.8 trillion.
Meanwhile, customs duty collections are forecasted to grow strongly by 20%, driven by higher duties on edible oil and the potential reversal of the gold customs duty cut. Additionally, measures aimed at protecting domestic industries could further support this growth.
However, excise duty collections are expected to remain subdued, mainly due to the reduction of the Special Additional Excise Duty (SAED) on domestically produced crude oil to nil in September 2024.
The report also highlights that non-tax revenue is likely to decline by 9.8%, reaching Rs 4.8 trillion in FY26. The dividends from the Reserve Bank of India (RBI) are expected to be significantly lower, projected to be between Rs 1.1 trillion and Rs 1.3 trillion, compared to Rs 2.1 trillion in the previous year. Furthermore, divestment receipts have so far amounted to only Rs 86 billion, which suggests a shortfall. Meeting the targets will depend largely on the success of large divestments such as IDBI Bank and Shipping Corporation.