India's net direct tax collections have experienced a marginal dip of 1.39% to ₹4.59 lakh crore, according to recent government data. This decrease is primarily attributed to a substantial surge in refund issuances and a slowdown in the growth of advance tax collections.

Gross direct tax collections, which include corporate tax, non-corporate tax, securities transaction tax (STT), and other levies, saw a rise of 4.86%, reaching ₹5.45 lakh crore for the fiscal year up to June 19, 2025, compared to ₹5.19 lakh crore during the same period last year. However, the increase in gross collections was offset by a significant 58% jump in tax refunds, which soared to ₹86,385 crore, up from ₹54,661 crore a year ago. This surge in refunds likely reflects improved taxpayer services and faster processing, aligning with the finance minister's directive to expedite refund disbursal.

Advance tax collections, which serve as an indicator of corporate profitability and individual income, grew at a slower pace of 3.87% to ₹1.56 lakh crore between April 1 and June 19, 2025. This is a notable deceleration compared to the 27% year-on-year growth recorded in the corresponding period last year.

A closer look at the advance tax figures reveals a mixed performance. Advance tax paid by corporates experienced a growth of 5.86% to ₹1.22 lakh crore, while advance tax payments by non-corporates, including individuals, Hindu Undivided Families (HUFs), and firms, declined by 2.68% to ₹33,928 crore.

The overall corporate tax collections witnessed a decline of over 5% to ₹1.73 lakh crore. In contrast, non-corporate tax collections, mainly personal income tax, recorded a slight increase of 0.7% to ₹2.73 lakh crore. Collections from the Securities Transaction Tax (STT) also showed positive momentum, growing by 12% to reach ₹13,013 crore during the period.

The government has set a direct tax collection target of ₹25.20 lakh crore for the current fiscal year 2025-26, which represents a 12.7% year-on-year increase. So far, the government has achieved 18.21% of its direct tax target by June 19. The government also aims to collect ₹78,000 crore from STT in FY26.

Several factors may have contributed to the slowdown in advance tax growth and the dip in net direct tax collections. Changes in personal tax slabs and reduced personal tax rates, effective from April 1, 2025, could have provided relief to salaried individuals, resulting in lower Tax Deducted at Source (TDS) collections. Increased capital expenditure by businesses could also have played a role. As companies invest in expansion and infrastructure, they can claim higher depreciation, which temporarily lowers their taxable profits.