As the government gears up for the Union Budget 2026-27, the Economic Survey 2025-26 has highlighted a quiet but important shift in India’s tax administration.

The focus is no longer only on scrutiny, audits or penalties. Instead, the tax system is increasingly relying on “nudging compliance” — a softer, data-driven approach that encourages taxpayers to voluntarily correct mistakes and pay the right tax.

For honest taxpayers, this shift matters. It reduces friction, lowers the risk of litigation, and makes compliance simpler and less intimidating.

What does ‘nudging compliance’ mean?
According to the Economic Survey, nudging compliance is anchored in behavioural economics. Under this approach, the Income Tax Department uses timely information, gentle prompts and data insights to influence taxpayer behaviour, instead of coercive enforcement.

India’s tax administration is quietly undergoing a structural shift from a system dominated by audits and penalties to one that relies on behavioural insights, data analytics and voluntary compliance. The Economic Survey 2025–26 points to the growing use of “nudges” by the Income Tax Department as a key factor behind improved tax collection efficiency, reduced litigation and higher taxpayer participation.

Drawing from behavioural economics, the Survey argues that timely information and gentle prompts can often achieve better outcomes than coercive enforcement, particularly in a digitally tracked economy.

Economic Survey 2026: The NUDGE Framework

At the heart of this approach is the NUDGE framework—Non-intrusive Usage of Data to Guide and Enable—which uses large-scale data analytics to identify potential non-compliance and prompt corrective action before formal enforcement begins. As the Survey explains, the approach “focuses on influencing taxpayer behaviour through timely information, gentle prompts, and data-driven insights rather than coercive enforcement,” allowing taxpayers to voluntarily revise or update filings.

On November 28, 2025, the Bombay High Court ruled that dividends paid by an Indian subsidiary of a foreign company to its non-resident shareholders fall under Article 11 of the India-UK DTAA. This means the tax department can't impose taxes on those dividends beyonds the rates set by the treaty. However, keep in mind that this ruling pertains to the dividend distribution tax (DDT) period, which has since been abolished.

Summary of the judgement
Chartered Accountant Suresh Surana, said to ET Wealth Online that in the case of M/s Colorcon Asia I'vt. Ltd. vs JCIT/PCIT/DCIT Tax Appeal No. 5 OF 2024, the appellant, M/s Colorcon Asia Pvt. Ltd., an Indian company and a wholly-owned subsidiary of Colorcon Limited, United Kingdom, was involved in manufacturing and supplying of pharmaceutical excipients.
According to Surana, during the financial years 2015-16 to 2018-19, the appellant declared and paid substantial dividends to its UK parent company and paid Dividend Distribution Tax (DDT) under Section 115-O of the Income-tax Act, 1961 (hereinafter referred to as 'the IT Act'"), at the domestic rates.

Amid a dip in tax collections relative to the Budget Estimates, refunds of direct taxes have slowed.

According to the Central Board of Direct Taxes (CBDT) data, the government released refunds of Rs 3.11 lakh crore as on January 11 in the current financial year against Rs 3.75 lakh crore during the corresponding year-ago period, a contraction of 16.92% on year.

The decline in refunds was particularly pronounced in the non-corporate segment, which fell 25% to Rs 1.71 lakh crore while the corporate tax refunds dropped 10% to Rs 1.83 lakh crore till January 11 in the current financial year.

Whenever any taxpayer wins their case in the Income Tax Appellate Tribunal or other tax appellate authorities, the income tax department has the option to file an appeal. However, before they do that, they must give effect (implement) the taxpayer's favourable order issued by ITAT and others. This process is called order giving effect (OGE) and is usually done

automatically. Additionally, the income tax return (ITR) filing portal also has an online option where you can request
the Assessing Officer (AO) to give OGE.

However, chartered accountants say that even after securing favourable appellate orders, taxpayers frequently encounter prolonged and unexplained delays in the issuance of OGE by the AOs.

On November 14, 2025, the Income Tax Appellate Tribunal (ITAT) Delhi bench ruled that the dilution of shareholding due to issue of fresh shares doesn't count as 'transfer' of interest in the company's assets. Therefore it won't trigger capital gains tax as long as the shareholder hasn't sold or relinquished any rights.

A brief overview about the property
A search and seizure operation took place at Ms Aeren's residence in Vasant Kunj and at the AEC group of companies' offices on August, 17, 2011. During this search, tax officers discovered a memorandum of understanding (MoU) between Mr. Gupta and Ms Aeren dated August 10, 2011. This MOU was seized by the tax dept, which revealed a property valued at Rs 150 crore located on Prithviraj Road, New Delhi.

This property was co-owned equally, with each of the two companies, Sh and Sn Private Limited, holding 50%. Ms Aeren owned 22,500 shares (2.25%) in each of these two companies (Sh and Sn private limited) during FY2010-11.

A Delhi High Court division bench quashed the proceedings against Prannoy and Radhika Roy on Monday, nearly a decade after the income-tax department served reassessment notices to the founders of NDTV.

The bench of Justice Dinesh Mehta and Justice Vinod Kumar also asked the I-T department to pay Rs 1 lakh each to the Roys.

“Notices issued to the petitioners and any consequent order or proceedings thereto are quashed,” the bench said in the order, as reported by legal news websites.

After securing a favourable judgment in the Tiger Global capital gains tax case, the tax department has said that not all tax disputes should be characterised as overreach or “tax terrorism”. Pending tax demands or withheld refunds in such cases should not automatically be viewed as arbitrary or coercive, officials said.

Sources in the Central Board of Direct Taxes (CBDT) said many disputes arise from genuine differences in interpretation, particularly in evolving areas of tax law. “Final certainty emerges only when the highest court settles the issue. Until then, both the taxpayer and the tax administration are bound by due process,” a senior CBDT official said.

According to officials, the department will now revive assessment proceedings for the assessment year 2019–20 in the Tiger Global matter. “The assessing officer will proceed to complete the assessments in line with the Supreme Court’s ruling. The refund claim of around Rs 967.52 crore, which was withheld under Section 241A, will now be addressed as part of the assessment and consequential demand proceedings,” the sources said.

The Supreme Court on Monday ruled that private equity firm Tiger Global is required to pay capital gains tax in India for its 2018 stake sale in Indian e-commerce firm Flipkart to American retailer Walmart, setting aside an August, 2024 Delhi High Court verdict to the contrary.

While holding that the transfer of the unlisted equity shares by the PE firm occurred under an impermissible arrangement that lacked real commercial substance, the apex court held that benefit under Article 13(4) of the India-Mauritius Double Taxation Avoidance Agreement (DTAA) would not be available to the firm and its subsidiaries involved in the transaction.

On December 1, 2025, the Madras High Court upheld ITAT Chennai's order, stating that a taxpayer can claim deduction under Section 80-IB without needing to own the land for this tax benefit. The Madras High Court held that ownership of land is not a mandatory condition for claiming deduction under Section 80-IB(10) of the Income-tax Act. Thus the high court held:

A developer need not be the land owner to claim Section 80-IB(10) deduction.
What matters is who actually develops the housing project, not whose name the land stands in.

Summary of the judgement
On December 1, 2025, Smt Rajini won the case in Madras High Court. She was represented by M/s A.S.Sriraman.

The tax department has issued notices to as many as five large foreign digital companies, saying their activities in India meet the threshold of a permanent establishment (PE), sources aware of the development said.

These companies are preparing to contest the assessments, challenging them at the assessing officer level or before the Dispute Resolution Panel (DRP).

“Four to five large foreign digital companies have already received tax notices that their Indian operations are a permanent establishment. In some cases, assessments have already treated them as PE,” one of the sources cited above told Moneycontrol.

A permanent establishment refers to a fixed place of business through which a foreign company conducts its business in another country.

Under tax law and treaties, once a company is classified as having a permanent establishment in India, it is treated as having a taxable presence in the country. Indian tax authorities can attribute a portion of the company’s India-linked income to that establishment, deduct related expenses and tax the resulting profit.
At the core of the dispute is how broadly the concept of permanent establishment is interpreted in the digital economy.

Net direct tax collection grew 8.82 per cent to over Rs 18.38 lakh crore in the current fiscal till January 11, the Income Tax Department said on Monday.

The mop-up includes net corporate tax collection of over Rs 8.63 lakh crore and tax from non-corporates, including individuals and HUFs, of Rs 9.30 lakh crore.

Securities Transaction Tax collection stood at Rs 44,867 crore between April 1 and January 11.
Refunds dropped 17 per cent to Rs 3.12 lakh crore during the period.

Gross direct tax collection increased 4.14 per cent to about Rs 21.50 lakh crore till January 11 of this fiscal.

In the current fiscal (2025-26), the government has projected its direct tax collection at Rs 25.20 lakh crore, up 12.7 per cent year-on-year.

The government aims to collect Rs 78,000 crore from STT in FY26.

Staring assessment year 2026-27, you might feel that filing of income tax return (ITR) has become slightly easier. With the new Income-tax Act, 2025 set to come into force from April 1, 2026, the government is preparing the ground for a simpler, cleaner and more technology-driven tax compliance system.

For millions of salaried taxpayers, the shift could mean fewer disclosures, more accurate pre-filled returns, and a filing experience that increasingly resembles a “verify and submit” exercise rather than a form-filling marathon.

Tax experts say the overhaul is not just cosmetic. It goes deeper into how income data is collected, reported and validated, with the aim of reducing errors, mismatches and unnecessary scrutiny — all of which have been long-standing pain points for taxpayers.

Before moving ahead, let’s understand key features and benefits of new income tax law, kicking in from April 1.

Even after more than eight crore income tax returns (ITRs) being processed in AY 2025-26, over 50 lakh taxpayers are still waiting for their returns to be taken up — and for refunds to be released.

Data available with the Income-tax Department shows that as of January 11, around 8.8 crore ITRs have been filed for AY 2025–26. Of these, 8.68 crore returns have already been verified, and 8.15 crore returns have been processed. This leaves nearly 53 lakh returns still pending for processing, many of which are linked to refund claims.

So why is the process taking longer this year?
Key reason: Heightened scrutiny and risk-based checks

According to tax expert CA Dr Suresh Surana, the primary reason for the slowdown is tighter scrutiny by the tax department, especially in cases involving refunds.

In the redevelopment of housing projects, homeowners hand over their rights to the builder, who then redevelops the project to add more units, space or both in the building. Homeowners can receive either cash compensation or extra carpet area in their current homes or both, based on their agreement with the builder.

However, in order to save on long term capital gains tax (LTCG) arising from this type of redevelopment projects, homeowners can take advantage of the Section 54 of the Income Tax Provisions.

Recently Mr. Muni from Bandra, Mumbai did exactly that and even won his case in ITAT Mumbai (ITA No. 2879/Mum/2025). Mr. Muni surrendered the old premises and, in exchange, received newly constructed flats along with some cash for hardship and cost adjustments. Plus, he paid separately to the developer for an additional 205 sq. ft. of space. He claimed a tax exemption under the Section 54 for the capital gains from the redevelopment, including the extra area he bought.

Less than 15 per cent of complaints against the Central Board of Direct Taxes (CBDT) were resolved during the first 8 days of January, data from CPGRAMS (Centralized Public Grievance Redress And Monitoring System) show. Although the exact nature of the complaints is not known, it is widely believed that most of the complaints are related to refunds, as social media is flooded with grievances about delays in getting Income Tax refunds despite filing the returns on time.

Meanwhile, data from CBDT revealed that refund outgo in 4 out of 7 sets of data released during the current fiscal so far, has recorded de-growth. This could also be reflected in social media posts. One user wrote: “Income tax refund pending for almost 7 months.” Another said: “It’s January 7th 2026 and I’m yet to receive my income tax refund filed in July 2025.” Complaint from another user says: “It is almost 7 Months, Still Not Processed. I have written off my refund & forgot about it.” The list is endless.

India is set to roll out a new Income Tax law from April 1, 2026. Called the Income Tax Act, 2025, the new law will replace the existing Income Tax Act of 1961, which has governed taxation in the country for over six decades.

Taxpayers are being advised to understand the changes early to avoid confusion once the law comes into force.

WHY A NEW INCOME TAX LAW?
Over the years, the existing tax law has become lengthy and complex due to repeated amendments, explanations and exceptions. The new Act seeks to clean this up by rewriting the law in simpler language and updating procedures to match modern financial practices.

Even after the December 31 deadline for filing belated income tax returns, a large number of taxpayers are still waiting for their returns to be processed, and many are anxiously tracking their refunds.

As per data available on the Income Tax Department website, around 8.80 crore income tax returns (ITRs) have been filed so far for Assessment Year (AY) 2025–26. Of these, nearly 8.66 crore returns have been verified, and about 8.02 crore returns have already been processed. That leaves roughly 63 lakh taxpayers whose returns are still under processing — and for many of them, refunds are yet to be issued.

So why are so many returns still pending, and should taxpayers be worried? Tax experts say the delays are largely intentional and compliance-driven, not a sign of system failure.

The Section 87A tax rebate has sparked quite a debate, especially among those with long term capital gains (LTCG) from equity or debt mutual funds. The Budget 2025 clearly stated that the Section 87A tax rebate is off the table for LTCG on equity mutual funds, but it didn’t apply this in retrospective cases. So, it’s now up to the courts and tribunals to decide.

The explanatory memorandum to Budget 2025 said: "The provisions of sub-section (1A) of section 115BAC are subject to the other provisions of Chapter XII i.e. determination of tax in certain special cases. Hence, proviso to section 87A clearly provides that tax on incomes chargeable at special rates (for e.g.: capital gains u/s 111A, 112 etc.) as specified under various provisions of Chapter XII, are not included while determining the rebate of income-tax under the first proviso to section 87A."

This case mentioned in this article involves the denial of the Section 87A tax rebate on LTCG from debt mutual funds from debt mutual funds and how a taxpayer won the case. In this particular case (no. ITA No.887/CHANDI/2025), the ITAT Chandigarh ruled on December 10, 2025 that the Section 87A tax rebate claim on LTCG from debt mutual funds was valid.

U.S. multinational corporations will be exempted from paying more corporate taxes overseas in a deal finalized by the Organization for Economic Cooperation and Development.
The OECD announced Monday that nearly 150 countries have agreed on the plan, initially crafted in 2021, to stop large global companies from shifting profits to low-tax countries, no matter where they operate in the world.

The amended version excludes large U.S.-based multinational corporations from the 15% global minimum tax after negotiations between President Donald Trump's administration and other members of the Group of Seven wealthy nations.