The annual budget for year 2026-27 was presented before Parliament by the Finance Minister Ms Nirmala Sitharaman on February 1, ’26. The broad breakup of the Revenue Budget numbers is given in the table below:
Values in Rupees crores.
A. Broad Revenue Budget breakup:
Emerging Issues: 1. Gross Individual income tax receipts are higher than corporate tax revenues in gross numbers and % of Gross Receipts. This seems to indicate a very worrisome fact. Less than 12% of PAN Card holders file individual income tax returns. If their contribution to the exchequer is more than the entire corporate sector than the corporate sector has immensely benefited in income tax rates and permitted deductions.
2. Dividends from Central Government public sector units includes dividends from public sector Oil companies. It would be interesting to know what is the dividend received from non-oil corporates. Two issues are emerging from the very low dividends revenue stream (less than 1.25% of Gross Receipts).
a. The central public sector units (non Oil entities and excludes finance entities like RBI, banks, financial institutions, etc) are not pulling weight. Their contribution to budget revenues as dividends is marginal and needs to be a lot higher.
b. The Central Government has become dependent on oil companies dividend and hence India is suffering from high oil prices – effectively high energy costs. High energy costs are making Indian manufacturing and transport logistics (personal or commercial) costs high thereby making India as an economy inefficient.
3. There is severe leakage in individual income tax collection. If we assume that 8 Crores income tax returns were filed in 2024-25, 9 crores returns will be filed for year 2025-26 and 10.25 crores returns development etc, the average per individual income tax (approx.) paid comes to:
a. Year 2024-25 — Rs 154500;
b. Estimate Year 2025-26 — Rs 146000;
c. Projection for 2026-27 — Rs 143000.
As can be seen there is a distinct falling trend per capita for individual income tax collection. The narrow base of individual income tax is working against the country. Plenty of high income tax earners are not getting caught in the direct tax net.
There is a serious need for India to review it’s individual income tax law and charging of tax. It is unfair and it is not yielding adequate revenues. Too much revenue is not getting picked up. We need to understand the priorities of India today and focus on the same. While one can take pride in GDP numbers and rankings, our per capita GDP is very poor and low. We need to spend significantly more on defence, internal security, education, health and medical facilities, skilling of employees, ease of transport, etc. The source of tax revenue for the above purposes is staring us in the face.
It is better public sector units management and dividend declaration and an alternative to individual income tax which as a revenue measure has failed and encouraged creation of black money and Indian money clandestinely moving overseas. There is a need to move to some form of Expenditure Tax instead of Income Tax which captures many more individuals in the Income Tax net.
One cannot understand why the number of persons studying the Budget document and contesting so many income assumptions and basis of revenue recognition, do not comment on the low central public sector units dividend declaration record and the declining trend of per capital income tax collection. These are troublesome issues and need to be addressed. We cannot hide that if Revenues don’t improve our national expenditure needs will force us to go into increased National Debt. That is the start of the trouble cycle and in a small way it has started in the Budget for 2026-27, where Debt increase is projected.
The Revenue Budget numbers are speaking and revealing the harsh truth. Our revenue streams are faltering.
Note – All the above discussions are on the Central Government Budget revenues. Equally serious discussions should occur on Budgets of state governments.
The time to act expeditiously is now. Divestment of public sector undertakings has not succeeded. The only option now is to run them much more effectively so that there is are twin benefits – higher corporate income tax due to better profitability and higher dividend declaration benefiting the Central Government as majority shareholder.
Disclaimer
Views expressed above are the author’s own.
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