New Income Tax Act to cut litigation, simplify compliance: FM Nirmala Sitharaman

Finance Minister Nirmala Sitharaman on Friday, March 20, said the new Income Tax Act seeks to significantly reduce litigation and simplify compliance, urging tax officials to treat taxpayers as “partners in nation building” rather than adversaries.

Speaking at the launch of the income tax website 2.0 and awareness campaign, ‘Prarambh 2026,’ in New Delhi, Sitharaman said the overhaul was necessary as the existing law had become overly complex over time.

“Income Tax Act of 1961 had become a maze due to time-to-time amendments,” she said, noting that the language had grown dense as changes accumulated over decades.

The new legislation, she said, is the result of around 75,000 person-hours of work, aimed at making the law simpler and more accessible. “When you give people simplicity, they embrace it easily,” she added.

Stating reduced disputes as one of the key goals of the new framework, she said, “I expect the temptation to reach the courts to have the exact interpretation should reduce now.”

Sitharaman also pointed to specific changes for taxpayers, including simplifying terminology for salaried individuals by removing confusion between “previous year” and “assessment year,” strengthening the presumptive taxation scheme, and reducing requirements for tax audits.

The finance minister said these measures would provide relief, especially to MSMEs.

‘Taxpayer is not your adversary’

Sitharaman called for a shift in the approach of the Income Tax Department, emphasising that officials must go beyond revenue collection.

“The taxpayer is not your adversary but your partner in nation building,” she said, urging officers to adopt a more collaborative mindset.

She added that while technology should be used to minimise physical interface, departments must not lose the human connection. Officials were also asked to conduct “samvaad” sessions across districts and tehsils to help taxpayers understand the new law.

Sitharaman stressed that reducing litigation must be a key priority, saying, “Every case that goes to a tribunal or court is a failure of our system,” adding that pursuing disputes without cost-benefit consideration reflects poorly on the department.

Underscoring the need for balance in enforcement, she referred to the Ugadi tradition and said, “I don’t want to be kadva (bitter), and I don’t want the taxpayer to be gud (jaggery).”

Push for tech use, youth engagement

The minister called for greater use of technology to handle taxpayer queries and curb evasion, while encouraging engagement with young professionals.

She suggested involving probationers and young experts to gather feedback from the ground and promote “youth-led tax tech innovation” to address avoidance and evasion.

“Use technology to contain evasion,” Sitharaman said, while also urging restraint and fairness in enforcement.

Avoid repeating past complexity

Sitharaman cautioned that the new law should not become overly complex over time, as happened with the 1961 Act.

“Don’t let this new Act meet the same fate as the Income Tax Act of 1961,” she said, urging the department to avoid frequent amendments that could dilute simplicity.

On a lighter note, the minister referenced the spirit of change, quoting a Hindi song: “Chodo kal ki baatein… aao hum mil kar likhenge income tax ki nayi kahani (forget about yesterday, let’s start a new income tax chapter),” she said, underscoring the intent to usher in a new tax regime.

She also reiterated her broader goal of building a fair and balanced system, saying she wanted neither a “harsh” tax administration nor an overly lenient one, but a framework rooted in clarity and trust.

Source from: https://www.cnbctv18.com/personal-finance/new-income-tax-act-to-cut-litigation-ease-audits-simplify-compliance-nirmala-sitharaman-ws-l-19872599.htm