Record breaking earnings: Despite huge tax exemption, country’s direct tax collection reached Rs 23.40 lakh crore

The financial year 2025-26 has proved to be a turning point for India’s economy. On one hand, the government almost doubled the income tax exemption limit, giving huge relief to the middle class, on the other hand, a solid increase of 5.12% was recorded in the country’s net direct tax collection. The total collection has crossed Rs 23.40 lakh crore, which is a direct evidence of the increasing number of Indian taxpayers and strong economic activity.

Relief in tax, yet strength in collection

The budget presented on 1 February 2025 had adopted a strategy of leaving more money in the pockets of taxpayers. Finance Minister Nirmala Sitharaman increased the tax exemption limit from Rs 7 lakh to Rs 12 lakh and also increased the standard deduction to Rs 75,000. Experts believed that this could put pressure on the government treasury, but the figures surprised everyone. The stable collection despite changes in tax slabs shows that now more people are honestly coming under the tax net.

Mathematics of budget target and reality

Although this figure of Rs 23.40 lakh crore is better than last year, it is slightly behind the revised estimate decided by the government.

• Budget Estimate (BE): ₹25.20 lakh crore

• Revised Estimate (RE): ₹24.21 lakh crore

• Actual Net Collection: ₹23.40 lakh crore

Even though the government has fallen short of its revised target by about Rs 81,000 crore, the growth of more than 5% compared to the last financial year is being considered a major achievement.

Corporate and personal tax performance

If we look closely at the tax collection figures, the corporate sector has performed tremendously this time.

• Corporate Tax: It saw a strong growth of 11.4% and reached ₹10.99 lakh crore. This shows that the profits and operations of Indian companies are on expansion.

• Non-Corporate Tax: Other tax collections, including personal income tax, remained almost flat at ₹11.83 lakh crore. The stability of this figure even after the cut in tax rates indicates that the shortfall in revenue has been compensated by the addition of new taxpayers.

Contribution of stock market: STT surge

The impact of the increasing interest of investors in the Indian stock market was also visible on the government treasury. Securities Transaction Tax (STT) collection increased by 7.9% to reach ₹57,522 crore. Along with this, the government also showed efficiency in refund management. Refunds worth ₹4.71 lakh crore were issued this year, which is 1.09% less than last year.

Experts’ opinion: What is the way forward?

Tax experts believe that these figures point towards improvement in ‘tax compliance’. According to Jayesh Sanghvi of EY India, the growth in corporate tax largely offset the impact of personal tax exemptions. Rohinton Sidhwa of Deloitte India says that the expansion of the tax base is a good sign for the economy. It is clear that in the coming time, the use of technology and data will reduce tax evasion and the collection base will become stronger.