India’s net direct tax collection drops 1.34% to ₹5.63 lakh crore due to higher refunds

India’s net direct tax collection between April 1 and July 10, 2025, stood at ₹5.63 lakh crore, showing a small drop of 1.34% compared to the same time last year. In the same period last year, the net collection was ₹5.70 lakh crore.

According to official data released by the government on Friday, July 11, this decrease has happened mainly because the tax refunds were much higher this year. So far, refunds worth ₹1.02 lakh crore have been issued in this financial year, which is a 38% jump from the previous year.

Breakdown of tax collections

The net direct tax collection is made up of different types of taxes. Here is a breakdown of the major components:

• Net corporate tax collection: ₹2 lakh crore

• Net non-corporate tax collection (includes individuals, Hindu Undivided Families (HUFs), and firms): ₹3.45 lakh crore

• Securities Transaction Tax (STT) collection: ₹17,874 crore

This data covers the collection during the period from April 1 to July 10, 2025.

While net tax collections have gone down slightly, gross tax collections (before refunds) have actually increased. Between April 1 and July 10, 2025, gross collections touched ₹6.65 lakh crore, compared to ₹6.44 lakh crore in the same period last year.

This marks a 3.17% growth in gross direct tax collection. The government sees this as a positive sign, showing that overall tax receipts are still heading in the right direction.

Direct taxes are taxes collected directly from individuals and companies. The most common types of direct taxes are:

• Income tax: Paid by individuals and firms based on their earnings

• Corporate tax: Paid by companies on their profits

• Securities Transaction Tax (STT): Collected when people trade in stocks and securities

These taxes are a major part of the government's income and help fund development, welfare schemes, and infrastructure.

Target for financial year 2025-26

Despite the small dip in net collections so far, the government has set an ambitious target for the full financial year. It aims to collect ₹25.20 lakh crore in direct taxes in the 2025-26 financial year, which would be 12.7% higher than the previous year.

Out of this target, the government expects to earn ₹78,000 crore from STT alone. This shows the increasing role of the stock market in contributing to tax revenues.

The key reason behind the drop in net tax collection is the sharp increase in tax refunds issued to taxpayers. A 38% rise in refunds means that more money was returned to taxpayers this year, which reduced the net amount collected.

This increase in refunds may be due to better compliance, faster processing by the Income Tax Department, and correction of overpaid taxes. However, it also affects the short-term revenue numbers.

Despite this temporary dip, the government remains optimistic about meeting its annual tax collection goals. Officials believe that tax collections will pick up in the coming months as businesses grow and personal income levels rise.

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The Income Tax Department is also working to increase awareness and improve compliance, making it easier for people and companies to pay taxes correctly and on time.

The slight fall in net direct tax collections is not a major concern, especially since gross collections are growing. It shows that the overall tax system is working well, and people are getting their due refunds on time.

At the same time, the government's strong yearly target signals that it expects the economy to grow steadily, with more revenue expected from businesses and financial transactions.

As the year progresses, all eyes will be on how the tax collections perform in the second half of the financial year — especially with festivals, rising consumption, and company earnings likely to rise.