'Stockmarketification' at play? Shankar Sharma warns of risks after tax collections slip

Noted investor Shankar Sharma on Tuesday flagged what he called the "Stockmarketification" of India's fiscal math after net direct tax collections fell 3.95% year-on-year to ₹6.64 lakh crore so far in FY26. 

"I said repeatedly since Union Budget in Feb, that, while the Govt has done amazing things for the economy, the only seriously worrying thing is the 'Stockmarketification' of our National Fisc. My rough estimates are that around ₹5–6 lakh crore was budgeted for FY26 from cap gains + STT + dividend tax. That looks in jeopardy. Given probable higher defence spend, capex nos of ₹11 lakh crore could be in jeopardy too, if fiscal deficit has to be met,” Sharma said in a post on X.

Chartered Accountant Tapan Doshi backed Sharma's concerns, calling the latest numbers "an early warning for FY26 math." He said, "Direct tax collections slipping 4% YoY to ₹6.64T is an early warning for FY26 math. When a sizeable share of revenues comes from cap gains, STT and dividend taxes, market dependence becomes a fiscal risk. Higher defence allocations and ambitious capex need strong, stable revenue flows — not ones tied to market sentiment. If this trend persists, the government may face tough choices between borrowing more or trimming spends. Fiscal prudence isn’t just about controlling deficit — it’s about ensuring the base of that revenue is resilient."

Government data released on Tuesday showed the fall in net collections was mainly due to higher refunds, which rose 10% year-on-year to ₹1.35 lakh crore between April 1 and August 11. Direct tax collections include corporate tax, personal income tax, Securities Transaction Tax (STT), and other levies.

Net corporate tax collection rose 3% to about ₹2.29 lakh crore, while non-corporate tax — covering individuals, Hindu Undivided Families (HUFs) and firms — fell 7.45% to ₹4.12 lakh crore. STT receipts stood at ₹22,362 crore in the same period. Gross collections before refunds came to ₹7.99 lakh crore, down 1.87% from ₹8.14 lakh crore in the corresponding period last fiscal.

Price Waterhouse & Co LLP Partner Hitesh Sawhney attributed the decline largely to the "higher volume of refunds issued, especially for the corporate tax." 

ICRA Chief Economist Aditi Nayar said collections were also affected by a later deadline for personal income tax return filings. "The available data on tax collections suggests that the GoI's personal income tax and corporation tax collections are required to record a high double-digit growth in the remaining part of FY2026, to meet their respective FY2026 targets. While this may seem challenging, the growth rates in net PIT and CT collections are likely to improve as the year progresses and the base normalises," she said.

For FY26, the Centre has targeted ₹25.20 lakh crore in direct tax revenue — a 12.7% increase over last year — and aims to collect ₹78,000 crore from STT alone.