India’s net direct tax collections may have dipped marginally this year, but the Income Tax Department is ‘comfortable and hopeful’ of meeting its ambitious target for FY26, Central Board of Direct Taxes (CBDT) Chairman Ravi Agrawal told The Indian Express in an exclusive interview.
As of July 10, net direct tax collections were 1.3 percent lower year-on-year, primarily due to higher refund outflows and a shift in return filing deadlines, Agrawal said. But he stressed that the revenue estimates already factored in the recent income tax cuts announced in the Union Budget.
“Taxes are derivative of economic growth. As the economy grows and with better administration, collections will grow too,” Agrawal said, adding that the Department is on track to meet the budgeted target.
Agrawal also shared his thoughts on how big data and AI are reshaping tax administration.
The Department collects 650 crore transaction records annually across 40 crore PANs to generate Annual Information Statements (AIS), a comprehensive ledger of financial activities available to taxpayers.
In FY25, 7.42 crore taxpayers accessed their AIS, collectively visiting the module 24 crore times. “This shows taxpayers are using these statements as a reference point for returns and advance tax planning,” Agrawal noted.
One of the Department’s most successful innovations is its ‘nudge’ strategy, using AI and analytics to detect gaps between declared incomes and financial transactions.
Project INSIGHT, the Department’s flagship analytics platform, creates 360-degree taxpayer profiles by combining data from banks, property registrars, and other institutions.
Recent campaigns have yielded big results:
Foreign Assets Nudge: 19,501 taxpayers were flagged, leading 62 percent to revise their returns.
False Deductions: AI detected Rs 9,000 crore in excess claims under Section 80GGC, prompting Rs 409.5 crore in additional taxes.
Crypto Income Disclosures: Ongoing nudges on Virtual Digital Asset (VDA) transactions are pushing more accurate reporting.
“We start with soft nudges, then escalate to harder nudges for repeat offenders,” Agrawal explained.
The ITR-U (updated returns) window has emerged as another powerful tool for voluntary compliance. As of June 18, 2025, 1.1 crore updated returns were filed, bringing in Rs 11,000 crore in additional taxes. “This shows that when given the opportunity and information, taxpayers are willing to correct past omissions,” Agrawal told The Indian Express.
The Department has also cut average refund processing time to 17 days, down from 38 days in FY21.
On reducing litigation, Agrawal said 5.5 lakh appeals are pending, but aggressive steps like expanding commissioner appeals and prioritising low-hanging cases have helped. In FY25 alone, 1.75 lakh appeals were disposed of, a 55 percent jump over the previous year.
Addressing concerns over privacy in the proposed new Income Tax Bill, Agrawal said sensitive data collected during probes will be reviewed in a “sanitised environment” and redacted if irrelevant.
“The evidentiary value of digital evidence has to be maintained, but we’re tightening procedures to protect taxpayers’ privacy,” he said.
Agrawal also summed up the Department’s approach: a blend of AI-driven analytics and targeted human intervention.
“From identifying non-filers to detecting wrong claims, AI is helping us make compliance easier for the honest taxpayer and harder for evaders,” he said.
