Sitharaman calls for taxpayer-friendly regime, reduced litigation
With the 31 July income tax return (ITR) filing deadline approaching, finance minister Nirmala Sitharaman on Friday asked officials to make the system more taxpayer-friendly
With the 31 July income tax return (ITR) filing deadline approaching, finance minister Nirmala Sitharaman on Friday asked officials to make the system more taxpayer-friendly by easing compliance for honest taxpayers while taking firm action against evasion. She said certainty in the tax regime is critical for the economy. Addressing the 167th Income Tax Day celebrations, Sitharaman said the department should give taxpayers with an opportunity to correct bona fide mistakes. "Our approach should ensure convenience for the honest taxpayer, an opportunity to correct bona fide errors, and firm consequences for deliberate evasion," she said, adding that a taxpayer is “not merely an assessee; a taxpayer is a citizen and a partner in India's development”. Also Read | Centre plans fresh round of CPSE stake sales via OFS route The minister called for a shift from litigation management to litigation prevention, saying tax certainty is one of the strongest foundations of voluntary compliance and an economic imperative that improves the ease of doing business while strengthening India's competitiveness as a global investment destination.
She urged tax officers to resolve appeals fairly and consistently, so that taxpayers gain confidence in the system instead of returning to litigation. Litigation prevention should rest on three pillars: clarity in taxpayer obligations through timely circulars, consistency in interpretation across jurisdictions, and institutional learning from appellate orders to shape future reforms. Appeals, returns and refunds The minister noted that the total pendency of appeals is down by over 34,000 cases to about 5.4 lakh, while around 6,000 departmental appeals have been withdrawn following the enhanced monetary thresholds announced in Budget 2024-25, enabling the department to focus on cases involving substantial questions of law. The tax department has evolved from being primarily a tax collection agency into one focused on fairness, efficiency, ease of doing business and taxpayer service, she said, adding that the implementation of the Income Tax Act, 2025 has simplified the law by reorganizing provisions, reducing uncertainty and lowering compliance costs.
Also Read | Parliamentary panel asks Centre to speed up digital overhaul of PDS As of 21 July, over 3.2 crore income tax returns had been filed, of which nearly 94% were verified and 60% processed. The department had also received over 1.3 crore refund claims, with 96% verified and 40% processed. In Assessment Year 2025-26, more than 7.3 crore income tax returns were filed, surpassing the previous year's level, while both gross and net direct tax collections saw growth of 4-5% in FY26. Responsive tax governance Sitharaman laid down the ‘5Rs of Responsive Tax Governance’: recognize, respond, redress, reflect and reform. Every taxpayer grievance must be acknowledged promptly, addressed with clarity and empathy, resolved within defined timelines, analyzed for recurring patterns and used to improve systems and procedures, she said. She also directed the department to further reduce refund processing timelines, saying prompt refunds strengthen taxpayers' confidence in the fairness of the tax administration and improve liquidity.
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