Net direct tax collection dips 1.39% to Rs 4.59 lakh crore on lower advance tax mop-up, higher refunds

New Delhi: Net direct tax collection so far this fiscal year dropped 1.39 per cent to Rs 4.59 lakh crore, on slowdown in advance tax mop-up and higher refunds, government data released on Saturday showed.

Advance tax, which is an indicator of corporate profitability and income of individuals, grew a meagre 3.87 per cent to Rs 1.56 lakh crore between April 1 and June 19, 2025. In the comparable period in 2024, advance tax collections had recorded an annual growth of 27 per cent.

Advance tax paid by corporates saw a growth of 5.86 per cent to Rs 1.22 lakh crore, while those by non-corporates, including individuals, HUFs and firms, dropped 2.68 per cent to Rs 33,928 crore.

Advance tax is paid in four instalments -- in June, September, December, and March.

Experts said attributed the slowdown in direct tax mop-up in the first quarter to the personal I-T rate revisions, which took effect from April 1. Higher capex by corporate also lowered tax profit, they said.

Between April 1 and June 19, 2025, refund issuances increased 58 per cent to Rs 86,385 crore.

Gross direct tax collection stood at Rs 5.45 lakh crore so far this fiscal year, logging a growth of 4.86 per cent in the year-ago period.

Overall, the net direct tax collection kitty stood about Rs 4.59 lakh crore in the fiscal year till June 19, 2025, registering a 1.39 per cent dip from Rs 4.65 lakh crore collected in the corresponding period a year ago.

During April 1-June 19, 2025, net corporate tax collection witnessed a slowdown at Rs 1.73 lakh crore, a decline of over 5 per cent year-on-year.

Non-corporate tax collections, which include mainly personal income tax, however, recorded a slight increase of 0.7 per cent to Rs 2.73 lakh crore.

Securities Transaction Tax (STT) grew 12 per cent to Rs 13,013 crore during the period.

In the current fiscal year (2025-26), the government has projected its direct tax collections at Rs 25.20 lakh crore, up 12.7 per cent year-on-year. The government has collected 18.21 per cent of its direct tax target till June 19. The government aims to collect Rs 78,000 crore from STT in FY26.

EY India Tax Partner Samir Kanabar said the marginal dip in net tax collections during the first quarter appears to be the result of a few expected and transitional factors.

"The revised tax slabs and reduced personal tax rates that came into effect from April 1, 2025, have provided relief to salaried individuals, and this is naturally reflected in lower TDS collections," he said.

On the corporate front, as companies invest in expansion and infrastructure, they benefit from higher depreciation claims, which temporarily lower taxable profits. This is a healthy sign of forward-looking investment behaviour, Kanabar said.

"Overall, these trends indicate a period of adjustment in line with policy changes and business cycles, and we expect a more balanced picture to emerge in the coming quarters," he added.

Deloitte India Partner Sumit Singhania said tax collections for the recent quarter, while subdued, puts spotlight on the emerging macro trends posing challenges to earning growth for corporates and non-corporates taxpayers for the financial year.

"Also, as several elements of current geo-political scenario plays out over next few months, impact of those developments would come to bear on the forecast for rest of the year too. That said, for a number of reasons, India finds itself in the position of strength amidst the ongoing global supply chain reset and therefore, a turnaround in tax collections in next quarters could be quite likely," Singhania added.