The Income-Tax department has no “sunset” date in mind for the old tax regime, even though 88% of individuals had moved to the new system in Assessment Year 2025-26, Ravi Agrawal, Chairman of the Central Board of Direct Taxes (CBDT) said. In an interview with The Indian Express, Agrawal also said that delays in issuing refunds is not intended to push people to the new regime. “We have already disbursed 95% of refunds. In February, we should be able to clear (most of what remains).”
Agrawal also discussed the tax proposals in the 2026-27 Union Budget, widening of the tax base, and the Securities and Transaction Tax hike for futures and options. Edited excerpts:
What has been the feedback like to the Budget proposals?
This time, the proposals have been different and the focus has also been different. As against the past, there are fundamental changes here which are going to have a long-term impact. So, it is not a question of just tweaking the rate a bit somewhere or bringing in a specific provision, it’s about fundamental changes: decriminalisation, minimisation of litigation, conceptual concerns such as buybacks, MAT (Minimum Alternate Tax), and data centres. It should not be seen as giving an exemption to data centres, but providing certainty. There was a question of whether global income would be taxed. We are maintaining the concept of business connection and saying that global income would not be taxed. But that does not mean domestic income would not be taxed. APA (Advance Pricing Agreement) processes is another, where we have made a commitment that we will complete it in a specific amount of time.
These are all fundamental changes that will help in tax administration and the taxpayer because multiplicity of proceedings is ending. That is a big statement from the tax department.
Another area was expanding the scope of updated returns and rationalising the due date for filing returns: we have spread it out so there is no unnecessary congestion. The AIS (Annual Information Statement) of business entities might get more time to mature, which can reduce the need for multiple revisions of returns.
TCS on overseas travel has been cut from 20% to 2%, which now seems to be the standard rate for most categories. What prompted this change?
Earlier, there was no data. Now we have information. So, you do analytics on that and decide whether it should only be for tracking the transaction or if it should also be for ensuring the return is filed. TCS (Tax Collection at Source) and Tax Deducted at Source (TDS) serve two purposes: tracking the transaction and ensuring the corresponding return is filed. We have seen that tracking the transaction itself would be helpful.
On an expenditure of Rs 1 lakh, 2% is Rs 2,000, but 20% is Rs 20,000, which blocks liquidity. Even if you make the refund process efficient, the person still has to wait for a few months before it is issued. That is why reviews should happen periodically: whether it is yielding results, if there is a need for course correction.
People had generally accepted it. But yes, there were certain representations, though it was not so aggressive. We took that call on our own to rationalise it.
What’s your take on the reaction to the hike in the STT on futures and options (F&O)? Collections are seen just Rs 10,000 crore or so higher.
That (revenues from STT) is not the thought. Ultimately, if it results in lower numbers (F&O trading volume), then the resultant tax will be lower; if there is no impact, it will be higher. This was an attempt from the tax department to address the issue. Ultimately, it is up to the regulator to see how to take it forward. I don’t have any advice for the regulator.
How many taxpayers have moved to the New Tax Regime?
About 86% of taxpayers are in the new tax regime across the board, which is 11% more than Assessment Year 2024-25. When you talk about individuals — ITR 1, 2, 3, and 4 — then it is 88% compared to 76% last year. If you look only at ITR-4, the people in the new regime are at 97%.
People are coming to the new tax regime in a big way. And with the revised slab rates, I believe for Assessment Year 2026-27, this figure will really go up.
What purpose is the old tax regime serving then? Are you looking at phasing it out?
The option is available. We are not imposing anything. But we hope and are sure taxpayers will find value in the new regime and move on to it. Then we will see at what point in time, whether this old tax regime is relevant or not. But the choice is always there for the taxpayer.
We don’t have a sunset (date) in mind. Taxpayers have their own reasons to be in the old regime, such as certain deductions that they find more beneficial, even if the new slabs are more attractive.
Pendency of refunds is a critical issue. These cases would mostly be under the old regime. Can this pendency nudge people toward the new regime?
That is not the intention at all. What we found through analytics was that in certain scenarios, refund or deduction claims were erroneous. We identified such cases and ran the NUDGE campaign and as much as Rs 1,750 crore of refund claims were reduced in revised returns. Overall, Rs 8,800 crore of additional tax came out of that exercise over a period of two years and 1.11 crore updated and revised returns were filed. The NUDGE campaign was done in November-December of 2024 and 2025.
We have already disbursed 95% of refunds. In February, we should be able to clear (most of what remains).
Taxpayers see a 20% fall in refunds and perceive it as refunds not going out. But that is not the case because rates and TDS were rationalised and more people are in the new regime now, so refund claims have gone down compared to last year. So, naturally, there will be lower refunds.
Last year’s I-T slab changes and the Goods and Services Tax cuts reduced the number of people who pay tax. Doesn’t it then become harder to widen the tax base?
Ultimately what we have to consider is who should pay, how much they should pay. If the tax slab is raised and a person is not required to pay, that is fine. But it is not that a person earning Rs 12 lakh is not required to file a return; a return has to be filed, only then it is applicable. That is not denting the widening of the tax base because ultimately the person is subjecting himself or herself to the jurisdiction and filing a return.
There would be people who are paying the tax and are not filing the return. A person who is filing the return may not be paying, a person who is paying but not filing, and a person who is neither paying nor filing – but you have information. If a person is filing and not paying and if he ought to pay, that is deepening (the tax base). If a person has paid and is not filing, you do a NUDGE and a new person comes (into the base); about 60% of the 1.11 crore people in the NUDGE campaign were non-filers who then filed. For those who don’t file or pay, there the role of tracking, TDS as a tracking tool, becomes handy. In the previous category, too.
Is rationalisation of penalties going to be an ongoing exercise?
The thought is to bring clarity and certainty, but the attempt is frequent changes should not be there. We have brought these amendments with the intent that when we are moving with the new Income Tax Act, we should bring in all the changes in one go itself.
What is the status of the new rules and the backend systems?
They will be out in February itself. It will be a phased rollout as and when the need arises. Since FY26 returns are governed by the 1961 Act, that pressure isn’t there yet. So, it has to be a phased rollout so that it’s easy for the taxpayer and the tax department because the software changes are substantial.
There has been demand for tax treatment parity for, say, bank deposits and equity mutual fund investments, with banks facing trouble in raising deposits. Debt mutual funds, too.
These are areas of research and analysis which need to be seen in the overall context and not just one player, the overall impact, to what extent the tax department should pitch in, or a remedy lies somewhere else. This is a continuous process. As times change, context changes. I am not suggesting that we are looking at this right now, but it is an ongoing process where we discuss with stakeholders and take calls at the appropriate time.
