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Informist, Wednesday, Jan. 21, 2026

 

By Priyasmita Dutta

 

NEW DELHI – The Union Budget may project a 9.0% growth in total tax collections in 2026-27 (Apr-Mar) from the revised estimate for FY26, with personal income tax and corporate tax collections driving growth. The Budget is likely to project the gross tax collections in FY27 at INR 43.6 trillion, according to an Informist poll of eight economists. While this is just 2.1% higher than the FY26 Budget estimate of INR 42.7 trillion, a sharp shortfall in collections is expected this year, resulting in a 9.0% growth compared with the revised estimate.

 

The government's total tax collection in FY26 is seen at INR 40.0 trillion, a shortfall of INR 2.7 trillion from the Budget estimate, according to the poll. As per the latest data, gross tax collections in Apr-Nov stood at INR 23.4 trillion, or 55% of the full-year target. Total collections during the period rose just 3.3% year on year, well below the Budget projection of 10.8%, let alone the 12.5% growth needed to meet the estimate. The government had missed the revised estimate for FY25 by INR 582 billion, meaning that to meet this year's target, collections will have to grow by 12.5%.

 

"Tax buoyancy is estimated at 0.7-0.8 in FY27, lower than 1.0 in FY26, amid expectations of a rebound in nominal GDP growth to 9.8% from 8.0% in FY26," economists at ICRA Ltd. said in a pre-Budget report. Tax buoyancy measures how well tax revenue grows relative to economic growth. A buoyancy of over 1 means tax revenue is rising faster than GDP growth. According to an Informst poll, the government is likely to project nominal GDP growth for FY27 at 10.1%, which means an 9.0% growth in revenue translates to a tax buoyancy of 0.9. 

 

Tax collections are lacklustre in FY26 owing to the government's dual tax bonanza – first, the income tax relief announced in the Budget and then the cut in goods and services tax rate in September. Economists project direct tax collections to revive in FY27. However, indirect taxes, particularly GST, may see limited improvement in collections. "While the gross tax revenue entails direct tax growth at a strong 11.1% YoY for FY27, the growth in indirect taxes is likely to be contained at 2%," ICRA said.

 

Within direct taxes, HSBC said corporate tax revenues could slightly recover in FY27, but personal income tax will remain soft since capital gains tax remains lacklustre. According to the poll, corporate tax collections are likely be projected at INR 11.9 trillion, up 10.5% from the revised estimate of INR 10.8 trillion. Personal income tax collections, on the other hand, are likely to be projected at INR 14.4 trillion, 12% higher than the revised estimate of INR 12.8 trillion. Income tax collections have seen sharp on-year growths in the last few years before FY26. The Budget had projected corporate and personal income tax collections in FY26 at INR 10.8 trillion and INR 14.4 trillion, respectively. 

 

The weakness in indirect tax collections in FY27 will primarily be because of the GST rate changes announced in September. However, the new cess on pan masala and the excise duty on tobacco and tobacco products will help partly offset the shortfall in GST collections. Economists widely diverged on the likely growth of GST in FY27, possibly due to differences in how the compensation cess is treated, which will be discontinued from Feb. 1.

 

ICRA estimates GST collections for FY27 at INR 10.6 trillion, slightly lower than the expected INR 11.0 trillion in FY26. On the other hand, economists at BofA Securities assume GST revenues will grow by 9.2% in FY27, with an effective tax rate of 10.1%. GST collections during Oct-Dec – the first three full months after GST rates were cut in September – grew a meagre 0.7% on year. Excise duty, in the meantime, could grow 16.5% on year in FY27 to INR 4.1 trillion. 

 

According to Capital Economics, in her ninth Budget, Finance Minister Nirmala Sitharaman is likely to announce measures to boost near-term spending in politically-sensitive areas. "That will need to be combined with higher and credible revenue assumptions and a small pullback in other areas to make up for the shortfall and ensure fiscal consolidation remains intact," Capital Economics said in a report. "To preserve fiscal credibility, the Budget will probably lean on optimistic GST revenue projections and continued large dividend transfers from the RBI," it added. Sitharaman will present the Budget for FY27 on Feb. 1. 

 

The following are the estimates for tax collections in FY27 and revised estimates for FY26:

 

	FY27 Gross Tax Budget Estimate	FY26 Gross Tax Revised Estimate	Growth %
Kotak Institutional Equities	42.72	39.31	8.7
BofA Global Research	46.5	35	32.9
Nomura	43.83	40.09	9.3
ICRA	44	41.1	7.1
Motilal Oswal Financial Services	43.4	39.9	8.8
QuantEco Research	44.32	40.7	8.9
Nuvama Institutional Equities	42.8	39.5	8.4
IDFC FirstBank	43.28	40.03	8.1
Median	43.6	40.0	9.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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Edited by Saji George Titus

 

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