The government is likely to miss its ambitious income tax collection target of 15% for FY26 by a big margin. Despite the 2025 Union Budget announcing a major relief to individual taxpayers, the government had set a steep target of 15% growth in income tax collection in FY26. However, going by the net income tax collections till 17th December, the government might miss the target by a big margin.
Net income tax collection in FY26 till December 17 rose by 6.4% to Rs 8.47 lakh crore against Rs 7.96 lakh crore even as the total net direct tax collection rose by 8%. To achieve the budget target Rs 14.4 lakh crore, the income tax collection must grow by 70% in the next three months.
“Overall, ICRA expects a sizeable miss in personal income tax collections relative to the FY26 Budget target of Rs. 14.4 lakh crore, which entails a 15% growth over the FY2025 provisional number,” says Chief Economist, ICRA Ltd.
Finance minister Nirmala Sitharaman in the Budget 2025 announced a slew of sops to ease the burden on the taxpayers of the country. Her personal income tax proposals include an increase in the threshold up to which no tax is levied on income. The income threshold was increased from Rs 7 lakh to 12 lakh, making any income up to Rs 12.75 lakh tax free (after including the standard deduction of Rs 75,000).
The new tax slab also significantly reduces the tax burden on all with the highest tax rate of 30% applicable on income over Rs 24 lakh from the earlier Rs 18 lakh. The new tax slab also increases the basic exemption limit from Rs 3 lakh to Rs 4 lakh, which means the first Rs 4 lakh would attract no taxes. The government had estimated a revenue loss of Rs 1 lakh crore due to its direct tax proposals in the Budget.
Meanwhile, corporate income tax collection rose by 10.5% so far in FY26 till 17 December 2025 to Rs 8.17 lakh crore. The budget target for FY26 is Rs 10.82 lakh crore. Corporate advance tax collection during the period rose by 8%, while advance personal income tax collection declined 6.5% during the period.
“Overall the corporate advance tax increase signals good corporate earnings. Non- corporate advance tax collections have however declined possibly on the back of rate cuts for individuals given in the previous budget,” an tax expert says.
Source from: https://www.newindianexpress.com/business/2025/Dec/19/govt-likely-to-miss-income-tax-collection-by-a-big-margin
