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Informist, Friday, Oct. 10, 2025

 

NEW DELHI – There is more room to rationalise and simplify the Income Tax Act, 2025, with further scope to tackle interpretation issues and make it more concise and simple, NITI Aayog Chief Executive officer B.V.R. Subrahmanyam said Friday. Parliament had passed the Income Tax Act in August, replacing the earstwhile Income Tax Act, 1961. The new Act has 536 sections and 23 chapters spread across 622 pages, 201 pages fewer than the older Act.

 

Even in the new Act, there are interpretation issues leading to criminal offences which can be omitted, Subrahmanyam said while releasing a working paper on tax transformation--decriminalisation and trust-based governance. According to the Income Tax Act, 2025, there are 35 provisions that lead to criminal prosecution. In the working paper, NITI Aayog has recommended retaining six of those provisions as criminal offence, involving deliberate, high-value, and injurious misconduct like orchestrated tax evasion or fabrication of evidence. 

 

NITI Aayog suggested 17 offences should retain criminal liability only for fraudulent or malafide intent, removing criminal sanctions for good faith procedural lapses--thereby distinguishing fraud from honest error. And lastly, it recommended 12 provisions should be fully decriminalised and addressed through civil or monetary penalties alone, including a range of administrative and technical defaults.

 

"Rationalised punishments, restoration of judicial discretion, and targeted criminalisation will lessen the burden on the criminal justice system while protecting fiscal interests and upholding constitutional rights," the paper said. 

 

According to Subrahmanyam, the new Income Tax Act is not sacrosanct and is open to further amendments. The government's top think tank is making policy suggestions in the interim so that the finance ministry can incorporate some of the suggestions before the Budget for 2026-27 (Apr-Mar) is presented in February. "...we would like some of the suggestions to be taken for the government's Budget planning," he said. 

 

NITI Aayog's further recommendations presented in the working paper includs removing mandatory minimum imprisonment for most offences, permitting courts to choose between fines and imprisonment, restoring the prosecution's duty to demonstrate wilful or fraudulent intent beyond reasonable doubt, simplifying and clarifying offence definitions, and establishing mechanisms for regular review of criminal provisions. 

 

"These reforms will help reduce litigation, enhance investor confidence, and lead to greater voluntary compliance and higher revenue collection by ensuring that enforcement mechanisms remain proportionate and fair," Subrahmanyam said.  End

 

Reported by Priyasmita Dutta

Edited by Akul Nishant Akhoury

 

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