Wednesday, 12 Nov, 2025
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The current pace offers a cushion for meeting the FY26 fiscal deficit target of 4.4% of GDP—supporting bond market stability, steady RBI policy, and investor confidence despite potential oil shocks or global rate swings.
The income tax (IT) department has stepped up its enforcement drive, recovering
Rs 20,000 crore in outstanding dues during the first quarter of the 2025–26 financial year—nearly twice the amount collected in the same period last year. According to officials at the Central Board of Direct Taxes (CBDT), the bulk of the recovery—Rs 17,244 crore—came from corporate tax arrears, followed by Rs 2,714 crore in unpaid personal income tax and Rs 180 crore from short or non-payment of tax deducted at source (TDS), the Economic Times reported on July 9.
Notably, tax officials are confident enough to set an ambitious target of Rs 2 lakh crore in total recoveries for the fiscal year. It may look like a routine administrative success—but for the Centre, this is a significant fiscal moment.
With revenue needs mounting and the pressure to keep spending high, the government must squeeze every possible rupee from existing channels. This bump in tax recoveries offers exactly that—without the political risk of raising tax rates or the economic cost of cutting development expenditure.
Economists say if this pace holds, it could offer a meaningful buffer for the government’s FY26 fiscal deficit target of 4.4 per cent of GDP. That cushion could, in turn, support bond market stability, keep the Reserve Bank of India on a predictable policy path, and maintain investor confidence—even if external shocks such as oil spikes or rate volatility return later in the year.
Also, it buys policymakers breathing room. With capital spending set to remain elevated—especially on infrastructure and job-generating programmes—the last thing the government wants ahead of Budget 2026 is a revenue shortfall.
Over the past few years, the IT department has invested heavily in digitisation, data analytics, and compliance tracking. The results are beginning to show. Instead of only widening the tax base, authorities are tightening enforcement on known defaulters—sending a clear signal that dodging dues won’t be tolerated.
Worth mentioning here is that much of the money collected in Q1 is from legacy disputes and backlogged arrears—not necessarily recurring streams. For durable fiscal gains, the finance ministry still needs to grow its base of compliant, voluntary taxpayers.
Tax sleuths are stepping up their crackdown on underreported income and suspected tax evasion. The CBDT has told its field offices to speed up collections, assigning specific recovery targets to each zone.
The focus is on cases where the government has already won in the first round of tax appeals. According to a senior official, these resolved cases confirmed tax demands worth Rs 1.96 lakh crore in favour of the department during FY25.
The CBDT recovered Rs 92,400 crore in outstanding dues during FY2024–25—a sizable improvement in its enforcement performance. The bulk of this came from corporate tax arrears (Rs 67,711 crore), followed by Rs 23,536 crore in unpaid personal income tax and Rs 1,100 crore from non-payment of tax deducted at source (TDS).
Tax arrears have ballooned in recent years, prompting concern within both the government and Parliament. According to a report from the Parliamentary Standing Committee on Finance, total outstanding demands by the income-tax department surged more than fourfold—from Rs 10 lakh crore in FY20 to Rs 42 lakh crore as of October 1, 2024. Of this staggering amount, the department has identified Rs 27 lakh crore as realistically recoverable and is now targeting it with renewed urgency.
The message from North Block is clear: the tax net isn’t just getting wider—it’s getting tighter. For a government balancing rising demands with limited resources, that’s a quiet policy win that speaks for itself.
