The government is likely to fall short of its income tax collection target for FY26, as subdued growth in personal tax receipts threatens to derail the ambitious projections set in the Union Budget 2025. According to TNIE, despite a 15% growth target, data from the income tax department indicate that collections so far remain well below the pace required to meet the annual goal.

Net income tax collections rose by just 6.4% to ₹8.47 lakh crore as of December 17, FY26, compared to ₹7.96 lakh crore in the same period last year. Overall net direct tax collections grew by 8% during the period. To achieve the Budget estimate of ₹14.4 lakh crore, income tax receipts would need to jump by nearly 70% in the remaining three months of the fiscal year—an outcome economists believe is highly improbable.

“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,” said Aditi Nayar, Chief Economist at ICRA Ltd.

The muted performance comes in the wake of major tax relief announced in the Union Budget 2025. Finance Minister Nirmala Sitharaman raised the threshold for zero tax liability from ₹7 lakh to ₹12 lakh, effectively exempting incomes up to ₹12.75 lakh after the standard deduction of ₹75,000. The revised tax structure also eased the burden across slabs, with the highest tax rate of 30% now applicable on income above ₹24 lakh, compared with ₹18 lakh earlier. The basic exemption limit was also increased from ₹3 lakh to ₹4 lakh.

The government had projected a revenue loss of about ₹1 lakh crore from these direct tax measures.

Meanwhile, corporate income tax collections have outperformed personal taxes. Corporate tax receipts grew 10.5% to ₹8.17 lakh crore as of December 17, FY26, moving closer to the annual target of ₹10.82 lakh crore. Corporate advance tax collections rose by 8%, reflecting stable corporate earnings, while advance personal income tax collections declined 6.5%.

“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,” said Rohinton Sidhwa, Partner at Deloitte India.