NEW DELHI: With fiscal pressures mounting due to rising committed expenditure and a slowdown in revenue growth, the government has stepped up the tax recovery drive. According to official sources, the Income Tax Department has directed field officers to intensify the recovery of confirmed and undisputed tax demands, strengthen monitoring of large non-compliant taxpayers and improve demand management.
Under the project termed the Central Action Plan for 2026-27, the department has specifically asked officers to prioritise recovering ₹2.57 lakh crore in demands upheld by the Commissioner of Income Tax (Appeals) in FY26. Special teams are being set up to pursue top arrear cases and analyse tax trends sectorally. The tax officers also have to ensure prompt refunds and better taxpayer outreach to improve compliance and minimise revenue leakages.
The Centre has set a direct tax collections target of Rs 26.97 lakh crore in FY27, an increase of more than 15% over the actual receipts of Rs 23.4 lakh crore in FY26. In FY26, direct tax receipts fell short of the revised estimates of Rs 24.21 lakh crore by Rs 80,594 crore. The West Asia conflict has cast a shadow on fiscal maths, and weaker revenues could further complicate the situation in FY27.
A major concern for the department is the weak pace of cash recovery despite a substantial reduction in outstanding arrears. During 2025-26, the department achieved 150% of its target for reduction of arrear demand—Rs 12.33 lakh crore against a target of Rs 8.24 lakh crore—largely through rectifications and appellate orders. However, actual cash collection stood at only Rs 85,000 crore against a target of Rs 5.04 lakh crore, translating into an achievement of just 17%.
To improve recoveries, the department has directed all assessing officers to classify the top 1,000 unclassified arrear demand entries into “Net Collectible Demand” (NCD) and “Demand Difficult to Recover” (DDR) by July 15, 2026. Dedicated teams will also be constituted by Principal Chief Commissioners of Income Tax (PrCCITs) to assist in the exercise.
The scale of pending unclassified demand remains massive. As of March 31, 2026, unclassified tax demands above Rs 50 lakh stood at Rs 7.88 lakh crore across 1.24 lakh demand entries, while smaller demand entries accounted for another Rs 1.33 lakh crore. Mumbai alone accounted for Rs 1.65 lakh crore of large unclassified demands, followed by Delhi at Rs 1.21 lakh crore.
The action plan has also expanded monitoring of large defaulters. Specialised teams under each PrCCIT region will now track the top 10,000 PAN-wise demand cases, up from the earlier 5,000 cases. Officials have also been asked to use the CERSAI (Central Registry of Securitisation Asset Reconstruction and Security Interest of India) portal for asset identification in recovery proceedings.
The department has fixed a target of reducing arrear demand by Rs 15 lakh crore during FY27, with Mumbai assigned the highest reduction target of Rs 4.23 lakh crore, followed by Delhi at Rs 2.56 lakh crore.
The FY27 Budget Estimates envisage collection of Rs 12.31 lakh crore from corporation tax, Rs 13.92 lakh crore from taxes on income and Rs 73,700 crore from securities transaction tax (STT).
Mumbai region, which contributes the largest share of direct taxes, has been assigned an overall target of Rs 7.54 lakh crore, followed by Delhi at Rs 5.22 lakh crore and Karnataka, including Goa, at Rs 3.8 lakh crore. These three regions account for 61% of the direct tax collection estimated for the country in 2026-27.
Besides recovery efforts, the tax administration plans sectoral analysis of advance tax trends, closer scrutiny of incorrect exemptions and deductions, and outreach programmes to encourage taxpayers to file updated returns and migrate to the new tax regime.
Source: The Financial Express
