The Centre’s advance direct tax collections for the second quarter of 2025-26 from companies, LLPs and individuals rose by a modest 3.9% on year compared with a 19% growth seen in the year-ago quarter, owing mainly to the personal income tax relief announced in the Budget.
Advance tax receipts for Q1FY26 had grown by 3.6% on year, due to the impact of tax cuts and higher refunds. For Q2, such receipts stood at Rs 2.95 lakh crore as of September 17 of FY26 compared with Rs 2.84 lakh crore in the year-ago period.
In the FY26 budget, the Centre sharply raised the income tax exemption limit to Rs 12 lakh from Rs 7 lakh in the new tax regime and lowered tax incidence under various income slabs, which the government said would leave around Rs 1 lakh crore in cash in the hands of taxpayers.
Personal tax relief dents advance collections
As a result, advance tax paid by personal income taxpayers, including other non-corporate taxpayers, fell nearly 9% on year to Rs 63,809 crore in Q2FY26, while corporate advance tax rose by 5.5% to Rs 2.3 lakh crore.
Nearly 24% drop in refunds helped the direct tax collections net of refunds to rise by 9.2% to Rs 10.83 lakh crore as of September 17, 2025, while corporate tax receipts after refunds were up by 4.9% on year to Rs 4.72 lakh crore. Income tax receipts excluding securities transaction tax grew 13.7% to Rs 5.84 lakh crore net of refunds.
Boost from fewer refunds
These growth rates are still lower than the budget estimates for the current fiscal. In Budget FY26, the Centre has pegged a direct tax collection growth of 13.2% at Rs 25.2 lakh crore for FY26 compared with Rs 22.26 lakh crore collected in FY25, despite substantial income tax relief in the budget.
Advance tax collections are a good indicator of corporate profitability and a rise in individuals’ earnings. Advance taxpayers have to pay 15% of their annual income tax liability by June 15, 45% by September 15 and 75% by December 15. With GST cuts expected to boost consumption and corporate earnings, officials expect the tax collections to improve from Q3 onward.
Refunds fell by around 24% on year to Rs 1.6 lakh crore as of September 17 in the current financial year.
Securities transaction tax receipts were flat at 26,306 crore till September 17, 2025, of FY26 compared with Rs 26,154 crore in the year ago period.
According to the Income Tax department’s action plan, Mumbai, Delhi, and Karnataka would lead the direct tax collection charge.