India's Tax Collections Soft in FY26, Improvement Expected in FY27: CareEdge

• India's central government tax collections have been subdued in FY26, growing by only 3.3% year-on-year in the first eight months, significantly below the budgeted 12.5%.
• Direct tax collections, including corporate and income tax, have lagged, with corporate tax growing 7.8% (budgeted 9.7%) and income tax 6.8% (budgeted 21.6%).
• The weak performance raises concerns about a potential shortfall against FY26 budget estimates, impacting fiscal flexibility.
• CareEdge expects an improvement in FY27 due to a lower base, improving nominal GDP growth, better GST compliance, and stronger economic activity.
• Government's income tax relief measures, aimed at boosting consumption, have impacted near-term collections but are expected to drive future economic activity and revenue growth.

Why It Matters: India's tax collections are currently soft but are projected to improve significantly in FY27 due to stronger economic conditions.