India's FY27 direct tax target faces key 2nd half

The government has set a budgeted target of Rs 26.97 lakh crore for direct tax collection in FY27, which experts believe is achievable, albeit with a concerted effort in the second half of the fiscal. Currently, about 53 per cent of the target has been met with overall direct tax collections, encompassing personal income tax, corporate tax and Securities Transaction Tax, showing a strong performance. Net direct tax collections grew 11.8 per cent year-on-year to Rs 14.42 lakh crore by November 10.

A significant boost to collections in the latter half of the fiscal is expected, particularly from corporate taxes and advance tax instalments. Amit Agarwal, a senior partner at Nangia & Co LLP, noted that December and March advance tax instalments, along with year-end payments, could provide a strong momentum. Corporate tax collections, reflecting healthy corporate profitability and economic growth, grew 18 per cent year-on-year to Rs 6.32 lakh crore by November 10.

However, net non-corporate tax collections, which include those from individuals, firms and Hindu Undivided Families (HUFs), remain subdued at about Rs 7.56 lakh crore, growing only 5.3 per cent year-on-year. This could be attributed to a moderation in refunds and stronger advance tax collections in the final quarter. Refund outflows were higher during the early months of the fiscal year, but they have reversed this fiscal, with I-T refund issuances jumping 26 per cent year-on-year to over Rs 3.08 lakh crore.

The government collected a higher percentage of Securities Transaction Tax (STT), which grew 52 per cent to Rs 54,078 crore between April 1 and November 10. This increase is attributed to a rise in the tax rate and the expanding capital market activity, driven by a robust IPO market and growing retail investment. EY India Tax Partner Jayesh Sanghvi emphasized that the direct tax collection target is achievable, but requires acceleration from the current levels, with a remaining requirement of about Rs 12.55 lakh crore in net direct taxes for the rest of the fiscal year.