The bad run for the Indian economy continues with the latest victim being the government's direct tax kitty, where collections have now entered the negative zone for the very first time.

Government sources said that direct tax collection in the current fiscal up to January 15 has fallen by 6.1 per cent compared with the corresponding period of previous year.

While the development would test the government's ability to manage its finances and contain the deficit, it has the potential to virtually seal the fate of any big tax cut announcement in the coming Budget.

According to sources, direct tax collections stood at ₹7.26 lakh crore in the April-January 15 period of FY20 as compared to ₹7.73 lakh crore in the same period of the previous year.

It is after a long gap that the tax collection is actually lower than the numbers given in the previous year. Already the development has rung the alarm bells that current economic crisis may be deep-seated and take much longer time to recover from.

Revenue Department officials have attributed the shortfall to a combination of the government's decision to cut corporate tax rates in September, the overall economic slowdown and the reshuffle in the department following the implementation of the faceless tax assessment plan that has been carried out without preparation.