For income taxpayers, the ‘nil tax’ slab was increased to Rs 12 lakh in the Union Budget 2025.
Despite announcing that no income tax needs to be paid up to an income of Rs 12 lakh under the new regime, the government is still expecting the share of income tax in gross tax collections to increase in the financial year FY26. In contrast, the share of receipts from corporate tax in the gross tax collections is expected to slightly decline in FY26.
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The government is expecting to get Rs 14,38,000 crore from income tax collections in FY26, which forms 33.7% of the gross tax collections for that year. This is an increase of more than one percentage point from the previous year (Rs 12,57,000 crore or 32.6%). On the other hand, receipts from corporate tax are expected to be Rs 10,82,000 in FY26, which forms 25.3% of the gross tax collections for that year. This is a slight decline of 0.1% point from the previous year (Rs 980000 crore or 25.4%).
It is to be noted that, in FY25, the government expected to collect Rs 11,87,000 crore (FY25BE) through income tax, but has so far ended up collecting Rs 12,57,000 crores (FY25RE).
Table 1 shows the absolute amounts of various types of taxes in Rupees crore.
The major indirect tax component — Goods and Services tax — is expected to bring in Rs 1,17,8000 crore in FY26, forming 27.6% of the gross tax collections. The share of GST in gross tax collections has remained the same in the past two years.
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Other tax components put together including union excise duties, customs and wealth tax is expected to form 13.4% of the Gross tax collections down from 14.4% in the previous year.
Chart 2 shows corporate tax, personal income tax, GST and other taxes as a share of gross tax revenue.
As can be seen from the chart, the share of corporate tax has been on a decreasing trend, while that of personal income tax has been increasing.
In FY19, the share of corporation tax in gross tax collections was close to 32%, which reduced to 27% by FY23 and now it is further down to 25.3% in FY26.The sharp fall in corporate tax could be attributed to the deep corporate tax cuts introduced by the Bharatiya Janata Party-led government in September 2019.
For income tax payers, the ‘nil tax’ slab was increased to Rs 2.5 lakh in 2014, then to Rs 5 lakh in 2019 and Rs 7 lakh in 2023, which has been further extended to Rs 12 lakh in the Union Budget 2025. Due to the change in ‘nil tax’ and other slabs, the government is expecting to forgo revenue of about ₹ 1 lakh crore in direct taxes, which amounts to 0.54% of the GDP (in market prices).
Published – February 01, 2025 02:52 pm IST
