India’s Fiscal Fortitude: Net Tax Receipts Top ₹3.5 Trillion, Fiscal Deficit Well Within Target in Early FY26

India’s fiscal landscape in the opening months of FY26 is showing resilience, with the government’s net tax receipts for April-May reaching ₹3,508.62 billion. This robust collection underscores strong economic activity and improved tax compliance, even as the fiscal deficit for May stands at just 0.8% of the full-year target—signaling disciplined expenditure and a healthy start to the financial year.

 

Key Highlights:

 

Net Tax Receipts Surge: For April-May 2025, the government’s net tax collections totaled ₹3.51 trillion, buoyed by strong GST inflows and direct tax performance. GST collections alone hit record highs in April (₹2.37 trillion, up 12.6% YoY) and remained strong in May (₹2.01 trillion, up 16.4% YoY), reflecting robust consumption and business activity.

 

Fiscal Deficit in Check: India’s fiscal deficit for May 2025 was contained at just 0.8% of the FY26 budgeted target, indicating prudent fiscal management. For context, the fiscal deficit for all of FY25 closed at 4.8% of GDP, meeting the government’s revised consolidation roadmap and setting the stage for a lower 4.4% target in FY26.

 

Tax Refund Dynamics: While gross direct tax collections grew, a sharp 58% rise in refunds—primarily due to higher corporate tax returns—led to a marginal 1.4% dip in net direct tax collections in the first quarter. Experts attribute this to transitional factors, including revised tax slabs and increased investments, rather than structural weakness.

 

State-wise Gains: Major states like Maharashtra, Karnataka, Tamil Nadu, and Gujarat posted double-digit GST growth, while some northeastern states saw even higher surges, highlighting broad-based tax buoyancy.

 

Outlook: The government’s continued focus on capital expenditure and infrastructure, coupled with strong tax revenues, is expected to support growth and job creation as India aims to become the world’s third-largest economy by 2030.

 

India’s fiscal discipline and strong tax momentum in the early months of FY26 offer a positive signal for investors and policymakers, reinforcing confidence in the country’s economic trajectory.

 

Source: Economic Times, Business Standard, Hindustan Times