Union Finance Minister Nirmala Sitharaman on Friday told officials of the Income Tax Department to ensure convenience for honest taxpayers while taking stern action against tax evasion, as certainty in the tax regime is an economic imperative.
Addressing the 167th Income Tax Day celebrations here, the Finance Minister urged officials to differentiate between deliberate tax evasion and bonafide errors while dealing with taxpayers.
"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.
"It should rest on 3 pillars: Clarity in taxpayer obligations through timely circulars -- Consistency of interpretation across jurisdictions -- Continuous Institutional Learning from appellate orders to inform future reform. Together, these principles reduce avoidable disputes while improving certainty for honest taxpayers," Sitharaman added.
She highlighted that tax certainty is an economic imperative and urged officials of the Income Tax Department to "exercise with humility" the power that the tax law gives.
Sitharaman also asked the Income Tax Department to focus of 'five Rs' in order to improve tax payer services and ensure ease of doing business. These include: recognise, respond, redress, reflect, and reform.
"Recognise every taxpayer's concern promptly, acknowledging that all grievances deserve timely attention. Respond with clarity, courtesy and empathy, ensuring taxpayers receive meaningful communication at each stage. And redress genuine grievances fairly and within defined timelines, delivering timely and reasoned resolutions," the Finance Minister said.
Also, "reflect on the root causes of recurring grievances, using complaints as an opportunity for institutional learning; and reform the processes, systems and procedures continuously so that similar grievances become increasingly rare," Sitharaman added.
"Our approach should ensure convenience for the honest taxpayer, an opportunity to correct bonafide errors, and firm consequences for deliberate evasion," she said, adding that the responsibility of the I-T Department has widened from a narrow focus on 'tax collections to a broader commitment to fairness, efficiency, ease of doing business and service'.
The Finance Minister also highlighted that the implementation of the Income Tax Act, 2025, has simplified the law to reduce uncertainty and lower compliance costs.
More than 7.3 crore income tax returns (ITRs) were filed for Assessment Year 2026, surpassing the number filed in the previous year, Revenue Secretary Arvind Shrivastava said on Friday.
Speaking about the ongoing reforms in the direct tax system, Shrivastava said the Income Tax Department should increasingly be viewed as a facilitator for honest taxpayers rather than merely an enforcement agency.
He stressed that the use of technology must make tax administration smarter, more efficient and less intrusive.
He said the government remains committed to greater automation, reducing human interface and ensuring faster and more seamless services for taxpayers.
Deepening and widening the faceless tax ecosystem, while providing greater tax certainty, consistency and ease of compliance, will continue to be among the department's key priorities.
Highlighting the department's performance during FY26, the Revenue Secretary said around 2.24 lakh tax appeals were disposed of during the year, registering a nearly 30 per cent increase over the previous year.
He added that the department also resolved nearly four lakh taxpayer grievances, achieving a disposal rate of about 95 per cent.
On revenue mobilisation, Shrivastava said both gross and net direct tax collections recorded growth of around 4-5 per cent in FY26 despite a challenging economic environment.
He also described the new Income-tax Act as a significant step towards simplifying India's tax framework.
As part of the legislative overhaul, the number of sections has been reduced to 536 from 819, making the law easier to understand and comply with for both individual taxpayers and businesses.
According to Shrivastava, the reforms are aimed at creating a transparent, technology-driven and taxpayer-centric direct tax administration that promotes voluntary compliance while reducing the compliance burden.
