Tax revenues locked in limbo rise despite settlement push

A major portion of tax revenues—backbone of government finances—remains unrealized

- Manjul Paul & Abhinaba Saha

Tax revenues are the backbone of government finances, yet a significant portion of these revenues remains unrealized. When funds are locked up in legal and administrative limbo, it creates a fiscal drag that stifles public infrastructure and welfare initiatives.

Tax revenue raised but not realized stood at ₹38.4 trillion at the end of FY25—30.5% higher than last year. It has grown nearly 200% since the introduction of the Direct Tax Vivad se Vishwas Scheme in 2020.

However, FY23 marked a clear inflection point, with the share 'tax not under dispute' rising significantly following the government's voluntary settlement schemes. Its share rose from less than 20% in FY20 to more than 50% by FY25.