Concerns about a possible lagging effect on the Centre’s tax collections due to the liberal income tax reliefs announced in the Budget FY26 have allayed, with the gross tax revenue (GTR) in April-May showing a decent 12% growth. While direct taxes grew just 5%, indirect taxes, driven by robust Goods and Services Tax collections, rose by 22% during the period, according to data put out by the Controller General of Accounts.
GTR is budgeted to grow by 12.5% to Rs 42.7 lakh crore in FY26.
The Centre reported a fiscal surplus in May, as budgetary spending is yet to pick up pace. The April-May period reported a fiscal deficit of a modest 0.8% of the annual target, the lowest since monthly fiscal numbers became available since 1997.
The government’s fiscal deficit stood at Rs 13,163 crore in April-May of 2025-26 compared with Rs 50,615 crore in the year-ago period or 3.1% of the target for 2024-25, according to the data.
In May 2025, the Centre’s spending was just Rs 2.8 lakh crore while revenues were at Rs 4.5 lakh crore, reflecting the higher-than-budgeted dividend from the Reserve Bank of India.
During the first two months of FY26, the Centre’s net tax revenues after devolution to the state governments, grew by 10% to Rs 3.5 lakh crore, while non-tax revenues surged by 41.8% on-year to Rs 3.6 lakh crore, thanks to the robust dividends from the Reserve Bank of India.
The net tax revenue is targetted to grow 13.5% in FY26.
During the first two months of the current fiscal, revenue expenditure increased by 9.4% to Rs 5.2 lakh crore while capital expenditure surged by 54% on year to Rs 2.2 lakh crore due to election-induced low base last year.
“Although the GoI’s capital expenditure surged by 54% in April-May 2025, this was on a low base, and the extent of the growth was somewhat lower at 32% as compared to the levels seen in April-May 2023. Nevertheless, the capex amounted to a healthy ~20% of the FY2026 BE, and the same can now contract by 1% in the remaining 10 months of FY26 and still meet the target,” ICRA chief economist said.
Given the buffers on the receipts side, ICRA believes that the government could push up capex by Rs 0.8 lakh crore in FY26 relative to the budget estimate, boosting the headline figure to nearly Rs 12 lakh crore as against the budget target of Rs 11.2 lakh crore, she said.
Both domestic and global economic landscape has changed since the beginning of FY26. “Economy is facing both tailwinds as well headwinds. It is too early to draw conclusion on achievability of FY26 fiscal deficit targets,” India Ratings chief economist said. The government is targeting to bring down the fiscal deficit to 4.4% of GDP in FY26 from 4.8% in FY25.
While, the slower tax collection growth is a concern, both non-tax collection and non-debt creating capital receipts have remained buoyant and may compensate for slippage in FY26 tax collection, Pant added.
Source from: https://www.financialexpress.com/money/gross-tax-receipts-grow-12-despite-i-t-relief-on-strong-gst-3898303/
