India’s Tax System Should Aim At Trust-Based Governance & Procedural Decriminalisation: NITI Aayog

New Delhi, Oct 10 (KNN) NITI Aayog has released the second paper under its NITI Tax Policy Working Paper Series–II, titled ‘Towards India’s Tax Transformation: Decriminalisation and Trust-Based Governance’. 

Releasing the paper, B.V.R. Subrahmanyam, CEO, NITI Aayog, said India’s tax system is entering a decisive phase characterised by simplification, modernisation, and a growing emphasis on trust in tax administration. 

“As India transitions from enforcement-driven compliance to trust-based governance, the focus must shift to proportionate, fair, and transparent enforcement mechanisms that empower taxpayers while protecting fiscal integrity,” he noted.

The working paper provides a detailed assessment of criminal provisions under the Income-tax Act, 2025, analysing their necessity, proportionality, and alignment with the government’s broader reform agenda. 

It proposes a principle-based framework to rationalise punishments, decriminalise minor or procedural non-compliances, and strengthen judicial discretion.

While acknowledging that the 2025 Act has removed several outdated offences, the study points out that 35 actions and omissions across 13 provisions still attract criminal penalties, most carrying mandatory imprisonment. 

The paper recommends a calibrated decriminalisation roadmap—removing imprisonment for procedural lapses, restricting criminal sanctions to wilful evasion or fraud, and expanding the scope of civil and administrative penalties.

According to Subrahmanyam, such reforms will reduce litigation, improve investor confidence, and advance India’s commitment to a fair, predictable, and globally aligned tax regime. 

The approach reflects a broader policy shift toward trust-based governance, encouraging voluntary compliance and efficient use of enforcement resources.

The paper’s release event was attended by representatives from the CBDT, CBIC, ICAI, and DPIIT, as well as leading tax experts from Vidhi Legal, Lakshmikumaran & Sridharan, Deloitte, and EY, among others. These stakeholders collaborated with the NITI Aayog Consultative Group on Tax Policy (CGTP).

(KNN Bureau)