With gross tax revenue projected to fall short of the Budget Estimate in the current financial year, the Union government has intensified efforts to narrow the gap by stepping up recovery of outstanding tax demands and tightening compliance measures.
Sources said the CBDT has asked its field formations to take additional recovery measures, particularly in cases involving large tax demands, as pressure mounts to shore up revenues in the remaining months of the financial year.
According to official estimates, the government would require gross tax revenue growth of 22.3 per cent during the remaining five months from November to March to meet the Budget Estimate of Rs 42.7 lakh crore for the year, a pace widely seen as challenging.
Government Acknowledges Likely Shortfall
A senior government official confirmed that tax collections are likely to undershoot the Budget target, though without specifying the exact quantum. "It is not possible to meet the Budget Estimate after providing significant tax benefits, including GST rate rationalisation and income tax exemption up to Rs 12 lakh," the official said, adding that measures are being taken to contain the shortfall.
To meet individual tax targets, the government would require a 14% growth in corporate tax collections to reach Rs 10.82 lakh crore, a 32.5% growth in personal income tax to meet the Rs 14.38 lakh crore target, and an 18% growth in Central GST collections to achieve Rs 10.10 lakh crore.
Notices, Refund Delays Likely
Tax experts indicated that increased enforcement actions could translate into more notices for shortfall in tax payments, particularly where current-year tax payments are lower than those made in the previous year.
"We have already started receiving notices for short payment of taxes and TDS. The government may also hold back large income-tax refunds till March 31, 2026, to manage cash flows," said a tax expert.
Another expert noted that recovery of outstanding demands, which had not been aggressively pursued in recent years, is now emerging as a key area of focus. "Delays in refunds could be one of the tools used to balance the Budget," he said. As per the latest direct tax data, refunds declined by 13.52% to Rs 2.97 lakh crore as on December 17.
Direct Tax Side Under Pressure
Experts expect the revenue shortfall to be mild to moderate, largely driven by weaknesses on the direct tax front, even as stronger corporate earnings following GDP growth could offer some support.
"The biggest gaps are expected in personal income tax, due to higher rebate claims and slower growth in salaried taxpayers, and in Securities Transaction Tax (STT), impacted by weak trading volumes and recent rate cuts," an expert said.
To bridge the gap, the government is also strengthening compliance through data analytics, increased follow-ups on advance tax payments, and stricter enforcement of Schedule FA (Foreign Assets) disclosures in income-tax returns. Targeted nudges are being issued to taxpayers with foreign assets and accounts that may not have been fully disclosed.
ICRA Flags Rs 1.2-1.5 Lakh Crore Revenue Miss
Echoing these concerns, ICRA Chief Economist warned that gross tax revenues could undershoot the Budget Estimate by Rs 1.2 lakh crore to Rs 1.5 lakh crore.
"Based on the FY2026 Budget Estimate and trends for the first seven months, gross tax revenues need to grow by over 22% year-on-year during November-March FY 2026. This would require most tax heads to grow significantly faster than in the earlier part of the year," she said.
The assessment has reinforced expectations that the government will rely heavily on enhanced compliance, faster recoveries and tighter refund management to limit the revenue gap by the end of the financial year.
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