India's Central Board of Direct Taxes (CBDT) is optimistic about achieving its direct tax collection target of ₹25.2 trillion for the fiscal year 2025-26 (FY26). This confidence stems from strong economic growth, increased formalization of the economy, and improved tax compliance.
Key Factors Driving Optimism
Several factors contribute to the CBDT's positive outlook. India's economic growth trajectory is a primary driver, with a projected nominal GDP growth of 10.5% for FY26. The increasing formalization of the economy, facilitated by initiatives such as enhanced TDS (Tax Deducted at Source) and SFT (Statement of Financial Transactions) reporting, is also playing a significant role. These measures help widen the tax base and bring more economic activity into the formal tax net.
Furthermore, the CBDT is leveraging data analytics and artificial intelligence to enhance tax administration and improve compliance. The use of data helps in identifying potential tax evasion and ensuring that taxpayers accurately report their income and pay their dues. The new tax regime, with its simplified structure and fewer exemptions, is also expected to boost voluntary compliance.
Recent Tax Collection Trends
The latest data from the CBDT indicates a positive trend in direct tax collections. As of November 10, 2025, net direct tax collection for FY26 has grown by 7% to ₹12.92 trillion. This growth is supported by a rise in net corporate tax collection, which increased by 5.7% to ₹5.37 trillion, and a significant 8.7% increase in non-corporate tax collection, reaching ₹7.19 trillion. Non-corporate tax includes taxes paid by individuals, Hindu undivided families (HUFs), firms, associations of persons (AOPs), and other entities.
While the securities transaction tax (STT) contributed ₹35,682 crore, it was slightly lower (0.67%) than the previous year, reflecting a somewhat subdued equity market turnover. Despite this, the overall direct tax collection has shown resilience.
Focus on Undisclosed Income
In addition to monitoring and improving tax collection, the CBDT is also focused on curbing black money and tax evasion. The board has launched an aggressive action plan for FY26, with a target of unearthing ₹2.4 lakh crore in undisclosed income. This plan involves identifying high-risk sectors and conducting targeted search and seizure operations. Jurisdiction-wise targets have been set, with Mumbai expected to contribute ₹60,000 crore and Delhi ₹45,000 crore. The CBDT intends to achieve 60% of this target through intrusive methods like raids, and the remaining 40% through non-intrusive probes such as data analysis.
Initiatives for voluntary compliance
The income tax department is also communicating with taxpayers to encourage voluntary compliance. This involves informing taxpayers about their financial transactions and any discrepancies in their tax filings. The updated return facility (ITR-U) has seen considerable success, with over 1.1 crore updated returns filed, generating more than ₹11,000 crore in additional taxes.
Challenges and Way Forward
While the CBDT is optimistic, it also acknowledges the challenges in achieving the ambitious tax collection target. Arrears of tax worth ₹54.53 trillion were pending as of June 30. The CBDT needs to address these issues effectively to meet its goals. The board is implementing various measures, including standardizing processing through targeted instructions and using data intelligence for reassessment.
