Advertisement
Niti Aayog has proposed a modern tax framework based on trust, transparency, and voluntary compliance to align with India's Viksit Bharat@2047 vision. In its working paper "Towards India's Tax Transformation: Decriminalisation and Trust-Based Governance," the Aayog suggested reforming criminal provisions under the Income-tax Act, 2025, to ensure punishments match the seriousness of offences. It emphasised reducing harsh penalties for minor violations and ensuring greater judicial discretion. The paper also supported ongoing initiatives such as Transparent Taxation and the Jan Vishwas Act to make compliance simpler and more efficient.
Niti Aayog has suggested overhauling India's tax governance system to make it more predictable, transparent, and citizen-centric. In its recent working paper titled "Towards India's Tax Transformation: Decriminalisation and Trust-Based Governance," the policy think tank stated that the country's tax laws must evolve in line with the principles of growth, inclusion, and trust envisioned under the Viksit Bharat@2047 initiative. Advertisement
The paper highlighted that a modern and fair tax framework can improve both the ease of doing business and ease of living. It stressed the need to create an environment where taxpayers comply voluntarily rather than out of fear of penalties. The Aayog pointed to the government's existing efforts such as the Transparent Taxation Honouring the Honest platform and the Jan Vishwas Act (2023) as positive steps toward reducing compliance burden and promoting trust between taxpayers and authorities.
The document also examined the criminal provisions of the Income-tax Act, 2025, which currently lists 35 distinct offences, with mandatory minimum imprisonment prescribed for 25 of them. According to the Aayog, this system limits judicial discretion and can result in disproportionate punishment for minor infractions. It recommended that criminal liability should apply only to cases of deliberate tax evasion or fraud, while smaller, technical or procedural defaults should attract civil penalties instead of imprisonment.
Niti Aayog proposed that every criminal provision should be reviewed to assess its legitimacy and necessity. It advised that offences be clearly defined and reviewed periodically to ensure they remain relevant and proportionate. The paper also mentioned that punishment should be reserved for acts causing measurable harm to public interest or revenue and should be consistent with the seriousness of the violation. Excessive sanctions, especially for minor errors, could discourage compliance and increase litigation, it noted.
The think tank further recommended aligning India's tax framework with the global move towards simplified and trust-based systems, where compliance is supported through technology, predictability, and accountability. It observed that decriminalisation would help reduce taxpayer anxiety, improve investor confidence, and promote a cooperative relationship between citizens and tax authorities.
This working paper adds to Niti Aayog's ongoing policy recommendations aimed at modernising governance structures. Over the years, the government has undertaken several reforms such as faceless assessment, reduction of corporate tax rates, and digitisation of tax filing systems to encourage voluntary compliance and transparency. The new proposal builds upon these steps, advocating a system that combines fairness with accountability while limiting unnecessary criminalisation.
Source PTI
5th Jun, 2025
25th May, 2023
11th May, 2023
27th Apr, 2023
Advertisement
Facebook
Whatsapp
