The direct tax collections for FY26 fell short of the revised estimates target of Rs 24.21 lakh crore, by over Rs 10,000 crore, mainly due to a lower-than-expected income tax mop-up, a senior government official told, adding that indirect tax collections were achieved.

The shortfall in tax revenue has not affected the fiscal deficit, however, and the government has been able to hit its target of 4.4 percent (as a percentage of GDP) in FY26, the official noted.

"There has not been any major compression in either capex or the revenue expenditure side in the previous fiscal," the official said. "There were also not any significant additional expenses."

For FY27, the challenge to hit the revenue target is bigger – given there has been excise duty tweaks announced - which will cost the exchequer Rs 5,500 crore every fortnight till it stays.

The fiscal deficit target for FY27 is 4.3 percent, as a percentage of GDP.

Officials believe, direct as well as indirect tax collections can come under stress if tensions remain for a longer period. The Centre has pegged direct tax target for FY27 at Rs 26.97 lakh crore, and indirect tax at Rs 16.79 lakh crore.

The gross tax revenue for FY27 is pegged at Rs 44.04 lakh crore, and for FY26, it was set at Rs 40.78 lakh crore.