India's Direct Tax Revenues Surge as States Gain from Increased Devolution

India's financial landscape is witnessing a significant uplift with net direct tax collections showcasing a robust 9.40% growth for the fiscal year 2025-26, tallying Rs 19.44 lakh crore as of February 10, 2026. This is a commendable rise from the Rs 17.77 lakh crore collected in the same span the previous year, according to the Income Tax Department’s recent report.

Despite this increase in direct tax collections, the process of issuing refunds has seen a decline. Refunds for the period fell by 18.82%, totaling Rs 3.34 lakh crore, contrasted against Rs 4.12 lakh crore last year. Meanwhile, corporate tax collections surged to Rs 8.90 lakh crore in FY 2026 from Rs 7.77 lakh crore, demonstrating a strong corporate fiscal performance.

In the legislative arena, Union Finance Minister Nirmala Sitharaman reassured the Lok Sabha by confirming that states will receive a 41% share of the divisible tax pool. Her assurance highlighted an increased devolution estimate of Rs 25.44 lakh crore for states, attributing the rise to the recommendations by the 16th Finance Commission.