Will India's Tax Collection Surge in FY27?
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Synopsis
As India prepares for FY27, a new report reveals a promising rise in tax collections and fiscal consolidation. With GDP growth expected to hit 10.1%, the government is poised to meet its fiscal deficit target. Key strategies for the upcoming Union Budget could reshape the financial landscape. Stay informed about these crucial developments.
Key Takeaways
- Tax collections in India are projected to rise significantly in FY27.
- Nominal GDP growth is expected to reach 10.1%.
- Fiscal deficit target of 4.4% for FY26 likely to be met.
- Continued fiscal consolidation with a target of 4.2% for FY27.
- Key strategies for the upcoming Budget will address tax neutrality.
New Delhi, Jan 7 (NationPress) India's tax revenues are projected to experience significant growth in FY27, with gross tax buoyancy increasing to 1.1 from an anticipated 0.64 in FY26, according to a report released on Wednesday.
The analysis by HDFC Bank indicates that nominal GDP growth is forecasted at approximately 10.1 percent in FY27, following an estimated 8.5 percent growth in FY26. Furthermore, capital expenditure is expected to rise by 10.5 percent to around Rs 11.5–12 lakh crore, while revenue expenditure may increase by 9.5 percent to Rs 41.9 lakh crore.
The report suggests that the government's fiscal deficit target of 4.4 percent for FY26 is likely to be met, with the deficit estimated at about Rs 15.79 lakh crore, slightly higher than the budget estimate of Rs 15.69 lakh crore.
Fiscal consolidation is expected to persist in the upcoming Union Budget for 2026-27, with a target of 4.2 percent for FY27, down from 4.4 percent in FY26. The debt-to-GDP ratio is projected to be 55.1 percent, compared to 56.1 percent in FY26 (BE).
The anticipated increase in government bond supply may lead to demand-supply imbalances, allowing for open market operation (OMO) purchases of around Rs 4–4.5 lakh crore in FY27, which could maintain the 10-year yield in the range of 6.5–6.7 percent.
The report highlights that announcements regarding India's inclusion in the Bloomberg bond index, a favorable borrowing profile (favoring short-term over long-term), continued liquidity support from the RBI, and Foreign Institutional Investor (FII) inflows could bolster bond yields.
A recent think tank report has urged the government to prioritize freezing peak direct tax rates, expanding the direct tax base through technology, avoiding MRP-based taxation, and completing the GST credit chain in the forthcoming Union Budget.
The Budget should also present a phased approach to include petroleum, electricity, and other excluded inputs under GST to restore tax neutrality and minimize cascading costs for industries, as stated in the report.
Additional priorities include incentivizing productive reinvestment and aggressively tackling the parallel economy.
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Point of View
It's essential to recognize the positive trajectory of India's tax revenues and fiscal management. The forecasted growth in GDP and careful fiscal consolidation efforts demonstrate the government's commitment to maintaining economic stability. It is crucial that the upcoming Union Budget addresses key areas to sustain this growth and enhance the overall economic landscape.
NationPress
08/01/2026
Frequently Asked Questions
What is the projected tax buoyancy for FY27?
The projected tax buoyancy for FY27 is expected to rise to 1.1, up from 0.64 in FY26.
What is the anticipated nominal GDP growth for FY27?
Nominal GDP growth is anticipated to reach approximately 10.1 percent in FY27.
What is the fiscal deficit target for FY26?
The fiscal deficit target for FY26 is set at 4.4 percent.
How much is the capital expenditure expected to grow in FY27?
Capital expenditure is expected to grow by 10.5 percent, reaching around Rs 11.5–12 lakh crore.
What are the priorities for the upcoming Union Budget?
Priorities include freezing peak direct tax rates, expanding the direct tax base through technology, and including excluded inputs under GST.
