India’s net direct tax collections contracted 1.3 per cent to about Rs 5.63 trillion as of July 10, with corporate taxes dropping 3.7 per cent and non-corporate taxes recording a fractional 0.04 per cent contraction, Income Tax department data released on Friday revealed.

Illustration: Dominic Xavier/Rediff

The Securities Transaction Tax was the only levy to clock an uptick so far in this financial year, rising 7.46 per cent to Rs 17,874 crore, from Rs 16,632 crore through the same period of 2024-25 (FY25).

Prior to refunds made to taxpayers, which jumped 38 per cent to nearly Rs 1.02 trillion by July 10, gross tax receipts had risen 3.17 per cent to almost Rs 6.65 trillion.

The growth in gross tax receipts was slightly higher at 4.86 per cent about a month ago, when total collections stood at Rs 5.45 trillion.

Net tax collections were 1.4 per cent lower than a year ago, as of June 19.

Overall corporate tax receipts were up 9.42 per cent by July 10, however, they received a significant chunk of the tax refunds made so far, adding up to Rs 89,863 crore which reflects a 56.85 per cent growth.

Net non-corporate tax receipts, which includes taxes paid by individuals, Hindu Undivided Families, firms, bodies of individuals, associations of persons, local authorities, and artificial juridical person, declined marginally to about Rs 3.45 trillion during the same period.

Refunds to such taxpayers, however, fell nearly 27 per cent year on year to Rs 12,114 crore.

Tax experts broadly attributed the decrease in the net direct tax kitty to the spike in refunds but noted there were other factors at play as well.

“On the personal tax front, the revised slab structure continues to offer relief to a large base of taxpayers, resulting in reduced tax liability,” said Samir Kanabar, tax partner at EY India.

“On the corporate side, higher capital expenditure has led to increased depreciation claims, thereby impacting immediate tax outflows.

“These measures, from expedited refunds to tax relief and capex incentives are aligned with the broader objective of stimulating economic activity and supporting long-term growth,” he noted.

The Centre’s Budget estimates for FY26 peg direct tax receipts at Rs 25.2 trillion.

Net direct tax collections had grown 13.57 per cent to Rs 22.26 trillion in FY25, exceeding the initial budgeted target of Rs 22.07 trillion.

Gouri Puri, partner at Shardul Amarchand Mangaldas & Co, linked the decline in net direct tax receipts primarily to the higher tax refunds.

“This reflects the government’s focus on improving taxpayer services, as timely and efficient refund processing is a critical enabler of ease of doing business,” she said.