Union Budget 2026: Direct taxes likely to be primary source of revenue, says Anand Rathi 

The Union Budget 2026 on February 1 is expected to project direct taxes as a primary source of revenue growth in FY27. In FY26, net direct tax collections logged a steady growth rising to Rs 18.37 lakh crore by January 11, 2026, data show. This shows a 8.8% year-on-year rise and stronger inflows from both corporate and personal income taxes. 

According to Anand Rathi, revenue growth in FY27 will be supported by wage growth and formalisation of employment, potential upside from the implementation of labour code and recovery in corporate profitability as domestic demand improves.

I-T and corporate tax collections are likely to rise broadly in line with nominal GDP, with direct taxes projected to increase by 10-11% on a year on year basis. 

On the other hand, indirect taxes are likely to grow at a more moderate pace. Ongoing GST rationalisation and customs duty restructuring could weigh on headline growth, particularly in H1FY27e. 

FULL COVERAGE:  Union Budget 2026

On the other hand, non-tax revenues are expected to remain a key fiscal buffer. Elevated dividends from the RBI and CPSEs are likely to persist into FY27, led by: Strong profitability in the banking system, lower provisioning requirements due to improved asset quality and RBI's income from forex operations and balance sheet stability.