FM Sitharaman asks I-T Department to ensure convenience for honest taxpayers, firm action against evasion

Finance Minister Nirmala Sitharaman on Friday asked the Income Tax department to ensure convenience for honest taxpayers while imposing firm consequences on deliberate evasion, and urged the Central Board of Direct Taxes (CBDT) to review 5.4 lakh pending tax appeals as part of a broader push for responsive tax governance.

Speaking at an event to mark the 167th Income Tax Day celebrations, Sitharaman said the department’s role had expanded beyond tax collection to include fairness, efficiency, ease of doing business and taxpayer service.

She urged tax officials to focus on five priorities — ‘Recognise, Respond, Redress, Reflect and Reform’ — which she described as the 5Rs of Responsive Tax Governance.

“Ultimately, tax certainty is an economic imperative that improves the ease of doing business and strengthens India’s competitiveness as a global investment destination,” the finance minister said.

Sitharaman also called for a review of the 5.4 lakh pending tax appeals, saying the backlog should not become a cause for concern for taxpayers. She stressed that the department’s long-term objective should be to prevent litigation rather than merely manage it.

“Tax certainty is one of the strongest foundations of voluntary compliance. Our long-term objective must shift from ‘litigation management’ to ‘litigation prevention’,” she said.

The finance minister said the implementation of the Income Tax Act, 2025 had simplified the law by reorganising it, reducing uncertainty and lowering compliance costs.

She also called for timely issuance of circulars and consistent interpretation of tax provisions to provide greater certainty to taxpayers. The implementation of the new law, she said, must be accompanied by consistent guidance and continuous engagement with taxpayers, professionals and industry.

“Over more than a century and a half, the I-T Department has evolved alongside India’s economic transformation, continuously adapting to meet the changing needs of the nation,” Sitharaman said.

She said the department must remain agile as India’s economy evolves and generates new questions.

The minister also highlighted the need to further reduce income tax return processing timelines, saying prompt refunds had strengthened taxpayer confidence in the fairness of tax administration and improved liquidity.

“… so the department must continue reducing processing timelines… Prompt refunds strengthen confidence in the fairness of the tax administration and improve liquidity for taxpayers,” she said.

Sitharaman

said the e-filing portal had been strengthened during the current filing season through expanded computing capacity, storage, bandwidth and network infrastructure.

These efforts enabled the portal to handle more than 1 crore taxpayer interactions in a single day, with daily interactions reaching around 1.6 crore at peak, she said.

During the current filing season till July 21, more than 3.2 crore income tax returns had been filed, nearly 94% had been verified and 60% had been processed.

Over 1.3 crore refund claims had been received, of which 96% had been verified and 40% processed, she said.

While lauding the work done by the Income Tax Department, Sitharaman cautioned officials against complacency.

“We should not rest on our achievements, however high they might be,” she said.

She said the department must recognise the difference between taxpayers who make bona fide errors and those who deliberately evade taxes.

“Our approach should ensure convenience for the honest taxpayer, an opportunity to correct bona fide errors, and firm consequences for deliberate evasion,” Sitharaman said.

She urged officials to exercise the authority conferred on them by tax law with humility and said the element of aggrandising oneself through the exercise of official powers must stop.

A taxpayer, she said, is not merely an assessee but also a citizen and a partner in India’s development.

The finance minister also asked the tax department to identify and address the root causes of recurring taxpayer grievances instead of merely resolving individual complaints.

She stressed the need for continuous engagement with taxpayers, professionals and industry to ensure that the tax administration remains responsive to emerging issues.

Speaking on the occasion, Revenue Secretary Arvind Shrivastava said reducing tax litigation had always been a focus area of the government’s reform agenda.

The Income Tax Department disposed of 2.24 lakh appeals in 2025-26, 30% higher than in the previous fiscal, he said.

The department had also pursued litigation reduction through clearer legislative drafting, simplification of procedural rules, greater use of technology and standardisation of processes to minimise ambiguity and disputes, Shrivastava said.

It had also taken specific steps to reduce litigation at the first appeal level.

“These measures need to be further strengthened to enable faster and more efficient resolution of tax disputes while safeguarding revenue,” he said.

CBDT Chairman Ravi Agrawal said grievance disposal had improved significantly, with the time taken to resolve taxpayer grievances reducing substantially.

During 2025-26, the department handled 77,765 CPGRAMS grievances and disposed of 72,933, achieving a 94% disposal rate.

In addition, 3,43,269 e-Nivaran grievances were handled, of which 3,26,217 were disposed of, resulting in a 95% disposal rate.

At the same time, the department had begun addressing the root causes of recurring grievances so that taxpayers encountered fewer difficulties in the first place, Agrawal said.

With inputs from PTI.