New Delhi, Feb. 1 -- The Union Budget presented on Sunday confirms a trend that has been building through FY26: the government is contending with a sizeable tax shortfall in the current fiscal year, as collections fall short of budgeted expectations.

Slower nominal GDP growth in FY26, coupled with revenue foregone from earlier cuts in income tax and the goods and services tax (GST), has squeezed receipts. Against this backdrop, Budget 2026 adopts a more conservative stance on tax projections, pegging gross tax revenue growth at 8% in FY27, down from the 10.8% assumed for FY26.

That caution, however, is partly offset by an unexpectedly strong showing in non-tax revenues, which has given the Centre some fiscal breathing room.

Gross tax r...