MC EXCLUSIVE Govt confident of meeting FY26 direct tax target despite likely STT shortfall

Securities Transaction Tax (STT) is a levy charged on every purchase or sale of equity shares, derivatives, and other securities on recognised exchanges.

Even as collections from the Securities Transaction Tax (STT) may fall short of the budgeted target set for the fiscal, the Centre remains confident of meeting its overall Rs 25.2 lakh crore direct tax collection goal for FY26, supported by steady growth in personal income tax revenues.

According to data released by the Income Tax Department on November 11, net direct tax collections (after refunds) stood at Rs 12.92 lakh crore between April 1 and November 10, 2025, reflecting a 7 percent year-on-year increase. STT mop-up, however, totalled Rs 35,681 crore, showing a decline compared to the corresponding period in the previous fiscal and well below the budgeted target of Rs 78,000 crore.

The non-corporate tax segment, of which Personal Income Tax (PIT) is the largest component, is showing maximum growth at 8.7 percent, while corporate tax grew at 5.7 percent so far this fiscal.

“Going by the current trend, collections should meet the target. We always keep our fingers crossed till the last minute because of cyclical ups and downs, but so far, it looks on track to meet the target. The government is confident of achieving the direct tax target, given the strong momentum in advance tax payments,” a senior government source told Moneycontrol.

“STT may be lower this year, but as long as overall direct tax receipts hold up, we are comfortable. Personal income tax is growing faster, balancing out the minor variations,” he added.

“STT collections are always sensitive to market conditions, and some moderation was expected given the recent volatility. But income and corporate tax inflows have been resilient and broadly in line with projections,” the official said.

Government sources noted that while equity trading volumes have fluctuated due to intermittent global uncertainties, tax buoyancy from formal sector employment and business profits continues to support collections. The next advance tax instalment due in December is expected to add significantly to the kitty.

STT may miss Budget estimate

The STT -- a tax levied on every purchase and sale of securities on recognised stock exchanges -- has seen slower growth this year as investor sentiment turned cautious amid market corrections in September and October.

“The shortfall in STT will not materially impact the overall fiscal arithmetic, as the broader direct tax base has expanded,” the official said.

The government had budgeted Rs 25.2 lakh crore in net direct taxes for FY26.

“The target was set keeping in mind the Rs 1 lakh crore revenue loss from tax relief announced in the Budget. The revenue department was concerned about the huge revenue loss, but seeing the growth we are relieved. The growth in PIT has come despite individuals with income up to Rs 12 lakh under the new regime effectively not paying any tax after claiming the rebate. With hardly any revenue-generating measures in the previous Budget, this growth reflects the underlying buoyancy in the economy,” he said.

What is STT

The Securities Transaction Tax (STT) is a levy charged on every purchase or sale of equity shares, derivatives, and other securities on recognised exchanges. STT collections rise when trading volumes and market turnover are high. Conversely, volatile or weak markets lead to reduced investor participation and lower STT inflows.

STT is part of the government’s direct tax kitty, along with corporate and personal income taxes, which together constitute more than half of the Centre’s gross tax revenues.