NEW DELHI: The Centre’s advance direct tax collections for the first quarter of 2025-26 from companies, LLPs and individuals rose by a modest 3.6% on year compared with a robust 27% growth seen in the year-ago quarter, as personal income tax relief announced in the budget and high corporate tax refunds weighed in.
Advance tax receipts stood at Rs 1,54,126 crore as of June 16 of FY26 compared with Rs 1,48,823 crore in the year-ago period.
In the FY26 budget, the Centre sharply raised the income tax exemption limit to Rs 12 lakh from Rs 7 lakh in the new tax regime and lowered tax incidence under various income slabs. The government said the restructuring would leave around Rs 1 lakh crore in the hands of taxpayers to boost consumption and investments.
Advance tax paid by personal income taxpayers fell 4% on year to Rs 32,971 crore in Q1FY26 while corporate advance tax rose 6% to Rs 1.21 lakh crore. This is in contrast to PIT advance tax growth of a whopping 46% and the corporate advance tax growth of 24% in Q1FY25.
The overall direct tax collections fell 1.5% on year to Rs 4.56 lakh crore as of June 16, 2025 while corporate tax receipts declined by 5.1% on year to Rs 1.72 lakh crore. Post-refund income tax receipts, including the securities transaction tax saw a flat 1% growth to Rs 2.84 lakh crore.
Although these are still early days, this raises the fear of direct tax receipts falling below the Budget projections. According to Budget Estimates, direct tax collections are to grow at 13.2% at Rs 25.2 lakh crore in FY26, from Rs 22.26 lakh crore collected in FY25.
Advance tax collections are a good indicator of corporate profitability and individuals’ earnings. Tax rates/exemptions do play a role in the receipts. Advance taxpayers have to pay 15% of their annual income tax liability by June 15, 45% by September 15 and 75% by December 15.
Overall direct tax refunds grew by a sharp 61% year-over-year to Rs 85,675 crore as of June 16 this fiscal, compared with a 34% growth year-over-year at Rs 53,140 crore as of June 16 in the previous fiscal. This could be the outcome of the government’s effort to reduce delays in issuing refunds, including those held up due to non-processing of returns under Section 143(1), and rectification cases impacted by system-related issues, analysts feel.
Rating agency ICRA has forecast India Inc’s operating profit margins (OPM) at a healthy 18.2-18.5% in Q1FY26, following the sequential recovery over the past few quarters.
Securities transaction tax receipts rose 13% on year to Rs 13,012 crore till June 16 of the current fiscal.
According to the Income Tax department’s action plan, Mumbai, Delhi, and Karnataka would lead the direct tax collections.
Source: The Financial Express
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