India’s economic growth is fuelling direct tax collection. The CBDT Chairman is confident that the FY26 tax collection target will be met, thanks to strong GDP growth and formalisation trends. Here’s what this means for taxpayers, professionals, and small businesses.
Why Tax Collections Are Rising
CBDT Chairman Ravi Agrawal recently stated that direct tax collections are closely tracking India’s economic growth trajectory. For FY26, the Union Budget projects ₹21.99 lakh crore as the gross direct tax collection target—a jump of over 10% from FY25 (RE).
Key drivers of higher collections:
- Nominal GDP growth projected at 10.5% for FY26
- Rising formalisation of the economy
- Widening of the tax base (AIS/TIS reporting, TDS compliance)
- Enhanced use of data analytics and AI in tax administration
- Better compliance post-new tax regime rollout (Section 115BAC)
Direct Tax Collection – 5-Year Trend
| Financial Year | Gross Direct Tax Collection (₹ lakh crore) | Growth YoY |
|---|---|---|
| FY21 | 12.31 | — |
| FY22 | 14.12 | 14.7% |
| FY23 | 16.63 | 17.8% |
| FY24 (RE) | 19.45 | 17.0% |
| FY25 (BE) | 21.99 (target for FY26) | 13.1% est. |
Source: Budget 2025–26 documents, CBDT estimates
Implications for Taxpayers
Higher compliance scrutiny
As the CBDT links tax buoyancy with economic indicators, individual taxpayers and businesses must expect:
- More AIS/TIS-driven notices
- Pre-filled ITRs getting more accurate, and harder to ignore
- TDS/TCS compliance checks, especially for high-value transactions
- Real-time monitoring for non-filers and under-reporters
Push towards new tax regime
The Chairman also hinted at a structural shift towards the default new tax regime, simplifying returns and encouraging voluntary compliance.
CBDT’s Legal & Policy Focus
- CBDT is issuing targeted instructions under Section 119 of the Income-tax Act to standardise processing.
- Judicial rulings (like SC in Ashok Kumar Jain, 2024) affirm the department’s right to use data intelligence for reassessment.
- CBDT Circular No. 06/2025 already extended the due date for FY25 returns, showing the department’s responsive approach.
Expert View: What Businesses Should Do
“With tax buoyancy improving, the era of casual compliance is over. Even small businesses should move to digital billing, reconcile books monthly, and adopt compliant invoicing tools.”
— S. Natarajan, Tax Consultant
Meeting FY26 Tax Target: A Reality Check
Challenges that remain:
- Revenue loss due to tax exemptions and deductions
- Possible global slowdown or monsoon-linked inflation shocks
- Litigation backlog choking actual realisations
Yet, with robust GST and direct tax collections in Q1 FY26, and rising advance tax payments, the CBDT’s optimism seems well-founded.
Final Word
India’s economy is growing, and so is the tax net. The CBDT is banking on compliance, technology, and GDP growth to meet the FY26 tax collection target. It’s time taxpayers and businesses keep pace.
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FAQs
Q1. What is the direct tax collection target for FY26?
₹21.99 lakh crore, as per Union Budget 2025–26.
Q2. What are the top contributors to rising tax collection?
Formalisation, digital tracking, GDP growth, and better compliance tools.
Q3. Will the new tax regime boost collections?
Yes. With fewer exemptions and simpler slabs, it increases voluntary compliance.
Q4. Are businesses under more scrutiny?
Yes. AIS, TDS, and GST data are being used together for profiling and assessment.
Summary
The CBDT expects to meet its ₹21.99 lakh crore FY26 tax collection target, driven by economic growth and stronger compliance. Here’s how this impacts individual taxpayers, businesses, and what to watch out for in the evolving tax landscape.