In a post-Budget interview, the Chairman of the Central Board of Direct Taxes (CBDT), Ravi Agrawal, stated that more than 90% of individual taxpayers in India may opt for the newly introduced tax regime following the significant tax reforms announced in the Union Budget.
The new tax regime offers a zero-tax slab for annual earnings of up to ₹12 lakh, which Agrawal believes will encourage a larger proportion of the population to shift away from the previous tax structure. Currently, about 75% of taxpayers have already made the switch to the new system.
One of the key highlights of the Budget, presented by Finance Minister Nirmala Sitharaman, was the increase in the exemption limit to ₹12 lakh per annum. This change, which is expected to provide significant relief to the middle class, will also simplify the tax filing process for a wide range of taxpayers.
The government's objective is to create a tax system that is more accessible, with a focus on enhancing convenience and reducing complexity.
Agrawal pointed out that tax filing is becoming increasingly simpler, with tools like pre-filled Income Tax Returns (ITRs) and automated Tax Deducted at Source (TDS) calculations, which help taxpayers easily file their returns without needing professional assistance.
Agrawal also discussed the government's broader approach to tax administration, which aims to be "non-intrusive" while relying on technology and artificial intelligence (AI) to improve tax compliance.
He explained that while there is always room for improvement, the current tax system is far more user-friendly than before. As part of the Budget reforms, the new tax regime does not allow for deductions or exemptions, which simplifies the process of calculating tax liabilities.
This streamlined approach is designed to appeal to the common taxpayer who can now file their returns with ease.
As part of the government's drive to boost compliance, Agrawal highlighted the potential for future improvements in the system. He expressed confidence that, with the new tax slabs and the zero-tax slab for those earning up to ₹12 lakh, the percentage of taxpayers opting for the new tax regime could rise significantly in the coming years.
The CBDT Chairman noted that the current 75% of individual taxpayers already enrolled in the new regime could grow to 90% or even higher as awareness of these reforms increases.
Agrawal also mentioned that the increased focus on data-driven tax administration is crucial for both widening and deepening the tax base. The department has been leveraging AI and human intelligence to gather data from multiple sources, making it easier to track taxpayers' financial activities.
This data is then shared with taxpayers, prompting them to comply and file accurate returns. The idea is to help individuals understand their obligations and provide them with the necessary information to fulfil them.
As a result, the process of widening and deepening the tax base is becoming more efficient, with taxpayers now more aware of the variety of transactions they engage in.
The CBDT's efforts to encourage voluntary compliance have yielded positive results, with over 90,000 taxpayers who had previously claimed incorrect or bogus deductions filing updated returns and paying taxes amounting to ₹1,000 cr.
Additionally, around 90 lakh people have filed updated Income Tax Returns (ITR-U), contributing ₹8,500 cr in taxes to the government. Agrawal explained that the key to this success is the accessibility of data, which allows taxpayers to make informed decisions and voluntarily correct their returns.
He stressed that the focus is now on encouraging taxpayers to correct any mistakes without requiring intrusive scrutiny, thereby increasing overall compliance.
In cases where taxpayers claim bogus deductions, the CBDT is working with both government and private sector organisations to help employees correct errors by filing updated returns.
Agrawal revealed that action is being taken against individuals or groups who are found to be misleading taxpayers, through investigations and surveys aimed at curbing tax evasion.
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