Budget ’26’s tax receipt report card

Hello,

This week, Carlyle bought into Edelweiss India’s home finance arm, showing continued appetite for loan solutions from global PEs.

Also, IFC pledged capital to support global firms expanding into India and is eyeing $50 million in equity and debt for NDR Smart Spaces continuing the lender’s interest in growing India’s infra development.

Meanwhile, India (and Japan) bucked a wider APAC slowdown last year in insurance dealmaking.

However, regulatory meddling and momentum continue: the competition court (CCI) reported 149 merger filings in 2025, while the government proposed divesting a 3% stake in BHEL via OFS.

And finally, LPs committed $30 billion to alternative assets in India in 2025, according to VCCEdge data.

I hope you enjoy this week’s roundup – please connect on LinkedIn to discuss how Ideals VDR can help with your next M&A deal.

Let’s dive in.

Deal Tracker

Our weekly roundup of confirmed M&A deals in India.

Market Trends

What do 10 union budgets tell us about India’s tax landscape for dealmaking? 

Tax receipts inform dealmakers about the general pulse of the formal economy of any country, which is mainly what they concern themselves with. These factors – other than leverage or borrowings at the geographic or sovereign level – shape valuations and deal appetite.

The happy news is that India has steadily gained in health in the course of the last 10 years, which is well after the late Dr Manmohan Singh’s privatisation drive got underway, and something the current finance minister of nine years has kept going, too.

One of Dr Sitharaman’s biggest agenda items is a vigorous but cautious disinvestment initiative, including bids to privatise public sector banks and insurers. Also important were the GST reforms introduced in 2017 to the annoyance of some small businesses (not always transparent about their earnings) which showed political will, given how much mum and pop shops mean for vote banks.

Rich tax receipts tell investors about corporate profitability, income growth, consumption trends while also enabling strategic acquisitions. Further, greater fiscal room for government lets it spend on priority development agendas over the next financial year. 

Naturally, weak receipts do the opposite: demand is likely slow, budget targets remain unmet, and financing is tighter. 

These numbers influence deal structuring, valuations and deal timing.

So what’s the score?

The most recent RBI numbers reveal total tax revenue grew from ₹19.19 lakh crore ($211.9 billion) in FY 2017-18 to ₹44.04 lakh crore ($486.2 billion) this FY. 

The share of direct taxes (income and corporate tax) grew to 55% of gross receipts in FY 2023–24, outpacing indirect taxes such as GST due to improved compliance.

Net direct taxes rose from ₹9.45 lakh crore ($104.3 billion) in FY21 to ₹25.2 lakh crore ($278.2 billion) in FY26 (BE), showing consistent upward momentum despite pandemic disruptions.

Direct tax collections rose 9.4% YoY to ₹19.44 lakh crore ($214.6 billion) net until February 10, 2026 driven by corporate tax up 14.51%; but this missed the revised ₹24.84 lakh crore ($274.3 billion) target, with even refunds down 18.82%. 

January 2026 recorded GST inflows at ₹1.93 lakh crore ($21.3 billion), up 6.2% YoY, and net GST revenue was up 7.6%.

Similarly, indirect tax collections climbed from ₹10.82 lakh crore ($119.5 billion) in FY21 to ₹17.50 lakh crore ($193.2 billion) in FY26 (BE).

Corporation tax jumped from ₹5.71 lakh ($63.0 billion) crore in FY18 to ₹12.31 lakh crore, a budget estimate ($135.9 billion) in FY27, while GST grew from ₹4.43 lakh crore ($48.9 billion) in FY18 to over ₹10 lakh crore ($110.4 billion) in recent years, per budget data.

What it means for dealmakers

Meanwhile, this is how the markets reacted to the budget:

Buy-side transactors are likely impressed by the strong fundamentals in both GST and direct taxes but that also complicates valuation conversations as Indian sell-side often seek multiples premised on healthy macro indicators.

India will likely continue to see increasing (value if not volume) transactional activity this FY. Sellers can benefit from strong corporate-tax receipts during exit negotiations, while softer growth can accelerate strategic, opportunistic deals. The policy focus on manufacturing and digital services is understandable given their robust tax contributions.

The direct-taxes calculus points to corporate profitability and formal growth. GST resilience signals sustained consumption, and a broader tax base post-GST rule changes in 2017 reflects good policymaking.

These point to a solid pipeline for M&A activity, but missed targets and softer-than-expected direct-tax growth will not go unnoticed by cautious LPs. 

Policymakers still need to balance growth, redistribution and fiscal prudence. For dealmakers, that means a generally favourable backdrop but with the usual caveat: stay alert to timing and be prepared for tighter valuation discussions where macro strength has already been priced in.