Archive · 12 Nov 2025
India's Tax Revenue Growth Slows in H1 FY26 Amid Lower Collections
Imagine the government is like a household trying to collect money to pay its bills.
In the first half of this year, the money the government collected from taxes didn't grow as much as it usually does, and in some cases, it even went down a little.
They expected taxes to grow by a lot, like 13% or more, but it only grew by about 2-3%.
This happened with both taxes from people and companies (direct taxes) and taxes on things we buy (indirect taxes) like goods and services.
Things like income tax and GST didn't grow as much as planned.
One reason might be that the overall economy isn't growing as fast as expected, and changes to tax rules might also be affecting collections.
However, the government also gets money from other sources, like dividends from the central bank, which have helped.
They also spent less on some things, which helped keep the government's total debt (fiscal deficit) from getting too big, though it is a bit higher than last year at this time.
Net tax revenue in India declined by 2.8% in H1 FY26 compared to the previous year.
Gross tax revenue grew by only 2.8% in H1 FY26, significantly below the budgeted annual growth estimates.
Direct tax collections rose by 3.1%, and indirect tax collections by 2.8%, both falling short of projections.
GST growth was 3.2% against an estimate of 14.2%, while Customs duties declined by 5.2%.
Despite revenue slowdowns, fiscal deficit remained managed due to higher non-tax revenues and controlled revenue expenditure.
- Who
- Government of India (as reported by CareEdge)
- What
- Net tax revenue declined by 2.8%, while gross tax revenue grew by 2.8% in the first half of FY26, falling short of budgeted double-digit growth estimates.
- When
- First half of the financial year (H1 FY26), April to September.
- Where
- India
- Why
- Slower growth in direct and indirect taxes, including GST and corporate tax, attributed to factors like lower nominal GDP growth and potential impact of GST rationalization, although non-tax revenues have performed better.
Positive Developments
Concerns and Challenges
Overall Revenue Growth
Positive Developments
Despite a slowdown, gross tax revenue saw a low single-digit increase, and non-tax revenues have been better than expected, including dividend transfers from the RBI.
Concerns and Challenges
Both net and gross tax revenues have declined or grown at significantly slower rates than the double-digit estimates for the full fiscal year, raising concerns about meeting fiscal targets.
Direct Tax Performance
Positive Developments
Income tax collections showed some improvement in the last two months.
Concerns and Challenges
Direct tax growth (3.1%) is far below the estimated 16.1%, with corporate tax growth (1.1%) also significantly lower than the projected 9.7%.
Indirect Tax Performance
Positive Developments
Union excise duties have exceeded their projected growth rate.
Concerns and Challenges
GST growth (3.2%) is considerably lower than the estimated 14.2%, and Customs duties have declined by 5.2% against a projected increase.
Fiscal Management
Positive Developments
Healthy capital expenditure and some rationalization in revenue expenditure have helped manage the fiscal deficit.
Concerns and Challenges
The fiscal deficit in H1 FY26 (36.5% of the budget estimate) is higher than in H1 FY25 (29.4%), even though it is in line with earlier years.
- Net Tax Revenue (H1 FY26)
- Rs 12.3 lakh crore
- Net Tax Revenue Change (H1 FY26 vs H1 FY25)
- -2.8%
- Budgeted Net Tax Revenue Growth (FY26)
- 13.5%
- Gross Tax Revenue (H1 FY26)
- Rs 18.7 lakh crore
- Gross Tax Revenue Growth (H1 FY26 vs H1 FY25)
- 2.8%
- Budgeted Gross Tax Revenue Growth (FY26)
- 12.5%
- Direct Tax Growth (H1 FY26 vs H1 FY25)
- 3.1%
- Indirect Tax Growth (H1 FY26 vs H1 FY25)
- 2.8%
- GST Growth (H1 FY26 vs H1 FY25)
- 3.2%
- Customs Duty Change (H1 FY26 vs H1 FY25)
- -5.2%
- Union Excise Duty Growth (H1 FY26 vs H1 FY25)
- 8.1%
- Fiscal Deficit (H1 FY26)
- Rs 5.7 lakh crore (36.5% of BE)
Sources
Net direct tax collection grew by 7% in April-November
Bhaskar Bhatt and Neville Tata inducted into Tata Trusts; Venu becomes Vice Chairman
Net direct tax collections up 7% to ₹12.92 trillion till 10 November
Net Direct Tax Collection Up 7%
Tax receipts strengthen as income levels rise
