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Dec 13, 2025
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Why Income Tax Act 2025 still criminalises small mistakes and why India needs a more trust-based approach
With the Income-tax Act, 2025 (the New Act) set to kick in on April 1, 2026, the upcoming Finance Bill, 2026 gives us an opportunity to re-think how India handles tax enforcement, especially regarding offences that could lead to prosecution.
The NITI Aayog's recently published working paper on tax policy, "Towards India's Tax Transformation: Decriminalisation and Trust-Based Governance," has proposed a detailed framework to rationalise and modernise criminal provisions under the Income-tax Act. The Finance Ministry should take a close look at the recommendations in this paper while putting together the Finance Bill, 2026, especially to make the criminal provisions in the New Act easier to understand.
Balancing Trust and Enforcement
India's tax administration has evolved significantly - with centralised processing of returns and refunds, automated case selection, faceless assessments and appeals, the Annual Information Statement (AIS), simplified ITR forms, and pre-filled returns all making it easier for people to comply.
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