The upcoming Union Budget for FY26 is likely to target a gross tax revenue (GTR) growth of 10.5-11% over the revised estimates (RE) of FY25, according to official sources.
The expected growth in GTR will result in a likely tax buoyancy of around 1, as nominal GDP growth would also be around the same level, said the sources. The tax buoyancy in FY25 is likely to be 1.1.
The BE of FY25 had pegged the GTR growth at 10.8%, but in April-November, the growth came in at 10.7%. The nominal GDP for the current fiscal year is, however, seen at 9.7%, according to the first advance estimates, as against 10.5% pegged in the BE.
This year, officials in the finance ministry believe the RE of GTR wouldn’t be substantially higher than the Budget estimate (BE), of Rs 38.4 trillion, despite a sharper-than-projected growth seen in personal income tax (PIT) collections so far.
The PIT mop-up in April-November has grown 23.5% on year, much higher than 13.6% growth pegged in the BE. In FY24 too, PIT collections had grown close to this level, while the Budget had anticipated a growth of 10.5%.
Corporate income tax (CIT) collections, on the other hand, have grown (-)0.5% in April-November, even as the BE has pegged the growth at 12%. “The lower-than-expected CIT mop-up growth is directly related to decline in corporate profits this fiscal, as there has been no changes in tax rates to explain this drop,” an tax expert said.
Another tax expert said that while the corporate tax base has increased over the years, with reduction in tax rates (in 2019-20), availability of tax holidays, and financial incentives, the corporate tax collection is growing at a slower pace as compared to earlier.
For FY26, an tax expert, expects CIT and PIT growth to be pegged around 13-15% each.
On the indirect tax front, collections in GST and Customs so far have surpassed the BE. In April-November, Customs mop-up has grown by 8.7% (against 2% growth in BE), mainly due to sharp rise in imports of gold and petroleum products. Gold imports in April-December have risen, in value terms, by 17% on year; and petroleum products by around 7%.
The Central GST collections along with cess mop-up has seen a collective growth of 12.1% in April-November, while the BE had pegged the growth at 11%.
Excise duty collections, meanwhile, contracted 0.6% in April-November, despite a 4.5% growth projected in BE. The decline in mop-up could be partly explained by the withdrawal of windfall tax on oil production & exports of petrol and diesel products.
Experts say in the upcoming Budget, revenue growth projections will be aligned with the broader economic growth forecast for 2024-25. “This cautious approach is further underscored by the modest GDP growth of 5.4% reported for the second quarter of FY25, which provides a realistic baseline for revenue estimates,” noted by another tax expert.
Source from: https://www.financialexpress.com/budget/budget-2025-may-project-gross-tax-revenue-growth-at-10-5-11-3728009/
