As part of the ongoing Azadi Ka Amrit Mahotsav celebrations, NITI Aayog has released its latest contribution to India’s evolving tax reform narrative through the second instalment in the NITI Tax Policy Working Paper Series–II, titled “Towards India’s Tax Transformation: Decriminalisation and Trust-Based Governance.”
This paper builds on the momentum of its predecessor, which focused on foreign investor certainty, and now addresses a core shift in tax administration — moving away from an enforcement-heavy system to a framework grounded in trust, transparency, and proportional enforcement.
A Decisive Moment in India’s Tax Evolution
Speaking at the release, Shri B.V.R. Subrahmanyam, CEO of NITI Aayog, described India’s tax landscape as entering a decisive phase. He noted that the transformation of the tax regime must be guided not just by better enforcement but by reduced compliance burdens, rational punishments, and increased trust between the state and taxpayers.
He emphasised that India’s modernising economy requires a tax policy that is fair, forward-looking, and globally aligned — especially if the country is to become a $5 trillion economy and a preferred destination for investors.
What the Paper Says
The working paper conducts a thorough assessment of the criminal provisions under the Income-tax Act, 2025, specifically questioning whether imprisonment is the most effective way to deal with non-compliance. Currently, the Act criminalises 35 actions across 13 provisions, with many mandating jail terms — even for minor or procedural lapses.
Using a structured, jurisprudence-driven analysis, the paper proposes:
- Decriminalising minor procedural and technical defaults
- Restricting imprisonment to cases involving deliberate fraud or wilful tax evasion
- Expanding the use of civil penalties and administrative sanctions
- Encouraging judicial discretion over automatic criminal prosecution
Towards Trust-Based Governance
The central theme of the paper is that trust and tax governance must go hand-in-hand. When taxpayers view the system as fair and proportionate, voluntary compliance improves, litigation reduces, and enforcement agencies can focus their efforts on serious violations.
Embedding trust into the tax system aligns with India’s broader governance reforms — such as faceless assessment, digitisation of tax filings, and the removal of redundant laws — that aim to make doing business in India easier, simpler, and more transparent.
Expert Participation and Broad Support
The release event brought together representatives from CBDT, CBIC, ICAI, DPIIT, and leading tax experts from legal and consulting firms including Vidhi Legal, Deloitte, EY, and Lakshmikumaran & Sridharan. These organisations have worked closely with the NITI Aayog Consultative Group on Tax Policy (CGTP), led by Dr. P. S. Puniha and Shri Sanjeet Singh.
The collaborative nature of the paper reflects the government’s commitment to inclusive policy-making and evidence-based reform.
A Path to a High-Trust, Globally Competitive Economy
As India celebrates 75+ years of independence through Azadi Ka Amrit Mahotsav, this working paper symbolises the next chapter in India’s governance journey — one that prioritises accountability without intimidation, and compliance without coercion.
The paper asserts that decriminalisation is not a softening of enforcement but a strategic reallocation of resources to focus on high-risk cases, thereby enhancing tax collection efficiency and boosting investor confidence.