In this exclusive interview with CNBCTV-18, Ravi Agrawal, Chairman of the Central Board of Direct Taxes (CBDT), outlines a transformative vision for India’s fiscal landscape. Centered on the upcoming Income Tax Act 2025 — set to take effect April 1, 2026 — Agrawal emphasises a shift toward simplification, the decriminalisation of minor defaults, and easing processes.
Below is the excerpt of the interview.
Q: How would you sum up the budget from the direct taxes side?
Agrawal: Budget announcements are in two directions. First, overall simplification process that has been initiated by the government in the last one-and-a-half years. As a result, the first step was coming up with the Income Tax Act 2025 where, essentially, the language was changed and simplified, and the provisions were presented in a manner that it made it easy for the people to understand.
Now was the time to further refine the processes.
We bring more clarity to the provisions, decriminalise the provisions and also make the entire process litigation free, ensuring that we minimise the litigation so going forward.
The second step is when we roll out this Income Tax Act 25, effective from April 1, 2026, having a simplified language with better presentation, and also the process is refined.
Q: When can we see the rules of the new Income Tax Act?
Agrawal: As Finance Minister Nirmala Sitharaman, yesterday, February 1, hinted that we would be coming up with the draft rules and forms in February itself, because we understand that the forms and rules are the ways in which a taxpayer or reporting agencies or other stakeholders would interact.
It would be basically very important for implementation of the income tax act. Also, they would also need time to go through the entire rules and then accordingly, make changes in their ecosystem.
So, these would be available in February itself, and after stakeholder consultation, then we would finalise it.
We have already done stakeholder consultations but thought that before we actually finalise it and give it a concrete shape and get approvals, we will again do this exercise.
Q: When we talk about litigation, you said that all of these process reforms are going to actually reduce the litigation burden, then why not a new litigation management scheme?
Agrawal: The “Vivaad se Vishwas scheme” that was first rolled out in 2020, taxpayer took benefit of it. The scheme was rolled out again in 2024 and taxpayers availed the scheme.
Therefore, “Vivaad se Vishwas” as a concept two times immediately in the last about five years have been rolled out and to that extent, we have taken care of the litigation part.
But then what we felt was going forward to minimise litigation, perhaps processes could be also changed.
Wherein we have done two things:
One is, conceptually, we are now providing multiple opportunities to taxpayer to come forward at different stages of the proceedings and accept the additions or the income and that have been determined or proposed to be determined in this case. And the person would be, would not be, then required to pay penalty, but additional tax payment, and the matter could be closed.
So, that is a big change that we have brought out this time.
And the other is consolidating the assessment and penalty procedures together, because otherwise it used to take a long time, multiple litigations at different stages, including the time frame.
Apart from that, for decriminalisation, that brings a sense of relief to the taxpayer that, if there is a default, the punishment should also be measured rather than excessive.
Q: On provisions under Black Money Act, how would you see them? Who will these actually benefit? You also have a nudge program that is going on where you are asking people to come clean, declare their foreign assets. Any update so far?
Agrawal: Under the Black Money Act, the taxpayers were given a window of three months at that point in time and some people availed of that scheme.
But the government was very firm that, so far, as black money is concerned, it has to be dealt with firmly.
At the same time, over a period of these 10 years, what we have found is, because of automatic exchange of information, we get information from different countries about the taxpayers and a lot of that information pertains to small taxpayers.
For example, some professionals, they’ve gone abroad, they got ESOPs and forgot or omit to declare it when they come back. Or, students or people of such nature, where penalty could be liable on small defaults and they might be subject to the Black Money Act.
Essentially, the thought was to give some sort of a window to such types of people where small defaults, which have been genuinely, actually omitted, to be reported. So those could be actually considered in this and therefore this threshold of income of one crore and the asset of five crores. If you see from dollar terms, it will be about a lakh dollar of income and so on.
This window would enable large number of small taxpayers, professionals who would, and I would appeal that they come forward and clean their records, and going forward, the sense of tentativeness would not be there.
Q: When we also talk about direct tax collections, the tax collection buoyancy has been questioned that if we see the past, the buoyancy was quite high, and now there seems to be some sort of a moderation. How do you see it?
Agrawal: Last year, substantial relief had been made available to the taxpayers, and therefore that was, the step in a direction that, yes, we have given relief now we would go for policy changes and procedural changes.
You would see that we are now nudging people towards new tax regime. We have rationalised rates and TDS rates.
Also, we have to see is whether the taxpayer base is increasing or not. We have seen the taxpayers base is increasing and people are complying.
It is only rationalization of the rates that is also one of the factors that the growth would not be to that extent; but at the same time, since the taxpayer base is increasing, this is basically a very fundamental, solid ground on which the taxation system is working.
So far as the growth is concerned, the growth is a function of the GDP and the tax buoyancy. GDP multiplied by the tax buoyancy is the tax growth. The GDP growth with 8% and the tax buoyancy is about 1.09; the tax targets are there for this year, and I am really sure that we will be able to handle it.
What I would like to flag here is the recent NUDGE (Non-intrusive Usage of Data to Guide and Enable) campaigns that we have done and which have brought out good results. Because wherever the taxpayers felt and we actually prompted the taxpayers that we find certain gaps in the income that has been reported or the deductions that have been claimed, you may like to see and the taxpayers have responded.
I am happy to report that in the last two years, taken together updated returns and revised income tax returns, is about 1.11 crores.
Q: How much extra collections have you got through NUDGE campaign?
Agrawal: NUDGE campaign has actually brought out substantial revenue. Overall, through this nudge campaign, the government has got about ₹ 8,800 crores additional and 1.11 crores of returns have been filed.
And, ₹ 6,500 crores of foreign income have been reported, along with an additional tax of ₹840 crores on the foreign income.
NUDGE is the new mantra.
Q: STT hike on F&O, a dampener for the markets and data centres tax holiday, a sweetener for the markets. How would you look at both of them?
Agrawal: Firstly, STT, it is not a question of revenue augmentation.
It is essentially to factor in and to see it in a manner that the volumes are growing exponentially. It is essentially a speculative nature of transaction.
There is one tweet which says that, well, your Income Tax Act does not say that it is speculative, but then that provision in the Tax Act is basically for the purpose of income tax, but the nature of the transaction remains speculative.
There are different connotations when you classify a transaction as a speculative transaction in the Income Tax Act but that does not mean that it is not a speculative transaction.
It is basically factoring and recognising it as a speculative transaction, and also the fact that retail investors are losing money in that, so, that is basically a step from the tax department now.
As the data centre is concerned, if you see, it’s a long-term vision to actually provide an ecosystem in the country and to promote infrastructure, which is going to go a long way in bringing jobs and value to the country.
