Resilient Tax Growth Ahead: FY26 Projections Indicate Robust Revenue

CareEdge Ratings anticipates strong tax collections in FY26, with a projected 10.4% increase in gross tax revenue, slightly surpassing the nominal GDP growth forecast of 10.3%. Despite anticipated slower income tax growth, corporate and indirect taxes are set to boost overall revenue, emphasizing economic recovery's role in achieving fiscal goals.

According to a recent report by CareEdge Ratings, the government's tax collections are expected to show healthy growth in the fiscal year 2025-26 (FY26). The report projects gross tax revenue to increase by 10.4%, which slightly exceeds the estimated nominal GDP growth of 10.3%, resulting in a tax buoyancy of 1 for the period.

While direct tax collections might grow at a slower rate due to potential tax relief measures impacting income tax, corporate tax collections are anticipated to rise by 11.4%. This increase is attributed to a recovering economy. Overall, projections set direct tax revenue growth at 9.6% to reach Rs 23.3 trillion.

In FY26, indirect tax revenue is set to grow by 11.9%, reaching Rs 18.1 trillion, with GST collections contributing significantly. Customs duty is expected to climb by 20% due to higher duties on edible oil, among other factors. Conversely, excise duty collections could remain subdued due to changes in crude oil duties, and non-tax revenue may decline by 9.8% to Rs 4.8 trillion.

(With inputs from agencies.)