Members of the Parliamentary Standing Committee on Finance, cutting across political parties, have expressed serious concern over what they described as the excessively punitive character of India’s present income-tax administration. The lawmakers questioned the widespread issuance of notices, frequent changes in tax rules and the considerable discretion available to officials, which they said created scope for administrative overreach.
The concerns were raised during a meeting of the committee held on Thursday, September 3, 2026. The panel, chaired by BJP Member of Parliament Bhartruhari Mahtab, examined the subject of “Direct Tax Reforms: Simplification, Rationalisation and Ease of Compliance”.
Representatives of the Department of Revenue under the Union Finance Ministry and officials of the Central Board of Direct Taxes attended the meeting.
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Taxpayers Should Not Be Treated as Suspects, Members Say
One of the principal issues raised during the deliberations was the Income Tax Department’s approach towards enforcement and compliance.
Several members reportedly questioned why ordinary taxpayers appeared to be treated with suspicion despite filing their returns and attempting to comply with the law. They pointed to the large number of notices being issued and the burden placed on taxpayers to repeatedly establish that they had fulfilled their statutory obligations.
A ruling party member was quoted as asking why all income-tax assessees should be treated like criminals. The member observed that taxpayers were frequently required to respond to notices and prove compliance even as the applicable rules continued to change, including through amendments with retrospective effect.
The committee’s observations brought attention to a long-standing concern among taxpayers and professionals that enforcement-driven administration can increase compliance costs, prolong disputes and undermine confidence in the tax system.
Members also expressed concern over the extent of discretion available to tax officials. They stressed that a simplified law would achieve little if its implementation continued to expose taxpayers to uncertainty, repeated proceedings and potentially excessive departmental action.
Panel Reviews Five-Month Impact of Income Tax Act, 2026
The meeting also examined the implementation of the Income Tax Act, 2026, which came into force on April 1, 2026.
Mr. Mahtab said the committee wanted to evaluate the impact of the legislation after its first five months of operation. The panel has sought detailed information from the CBDT to determine whether the new framework has achieved its stated objectives of simplification, rationalisation and improved ease of compliance.
Among other things, the committee has asked whether the number of income-tax assessees has increased since the law came into effect, whether direct-tax collections have improved and whether the volume of litigation has declined.
The panel also sought information on compliance difficulties and operational problems encountered by taxpayers during the implementation of the legislation.
According to Mr. Mahtab, officials placed substantial data before the committee. Preliminary information indicated that income-tax revenue had grown significantly alongside the continued expansion of the economy.
However, the committee was not satisfied with examining revenue growth alone. Members sought to determine whether higher collections were accompanied by a more predictable, taxpayer-friendly and less adversarial administrative system.
Individual Taxpayers’ Growing Contribution Raises Concern
Another major subject discussed at the meeting was the increasing contribution of individual income taxpayers in comparison with corporate taxpayers.
Some committee members noted that individual income-tax collections had assumed a growing share of total direct-tax revenue. They contrasted this with the position in several economies comparable to India, where corporate tax receipts substantially exceed collections from individual taxpayers.
The members sought further details on the reasons behind this changing composition of direct-tax revenue and its implications for salaried individuals and other non-corporate taxpayers.
The discussion indicated that the committee would examine whether the tax burden was becoming disproportionately concentrated on individuals even as corporate tax rates and collections followed a different trajectory.
Department Reportedly Succeeds in Only 14% of High Court Cases
The effectiveness of the government’s efforts to reduce tax litigation also came under scrutiny.
Mr. Mahtab acknowledged that difficulties persisted in the implementation of the new law, particularly in relation to appeals and unresolved disputes. He referred to cases pending before appellate authorities and litigation reaching the High Courts.
According to the committee chairman, the Income Tax Department succeeds in only around 14% of the cases decided by the High Courts.
The figure prompted questions about the quality of departmental decision-making and the justification for pursuing cases that may ultimately fail before judicial forums. A low success rate could also indicate the need for stronger internal review before appeals are filed or continued.
The committee’s examination is expected to focus on whether tax authorities are applying monetary limits and litigation-management policies effectively, and whether avoidable disputes are being filtered out before reaching higher appellate forums.
Reducing unnecessary litigation has remained a recurring objective of successive direct-tax reforms. The panel’s observations suggest that the effectiveness of these measures will be evaluated on the basis of actual outcomes rather than legislative simplification alone.
Faceless Assessments and Technology Glitches Examined
The functioning of faceless assessment and other technology-based tax administration systems was another important part of the discussion.
While acknowledging the increasing use of technology in tax proceedings, Mr. Mahtab said taxpayers continued to encounter operational difficulties. Faceless decision-making mechanisms had been introduced, but glitches affecting assessees still required corrective action, he added.
Members raised concerns involving different categories of taxpayers and their experience with digitally administered proceedings. These included difficulties arising from technology-based communication, compliance procedures and the manner in which cases were processed under the faceless system.
The committee indicated that greater reliance on technology must be accompanied by effective grievance redressal and safeguards against procedural unfairness. Digital administration, members suggested, should make compliance easier and reduce personal discretion rather than create fresh obstacles for taxpayers.
The CBDT is expected to explain the steps being taken to address these shortcomings and improve the operation of technology-driven assessment and appellate mechanisms.
Committee Seeks Data on Revenue, Assessees and Pending Cases
The parliamentary panel has asked the tax authorities to furnish additional data concerning the impact of the Income Tax Act, 2026.
The information sought includes changes in direct-tax collections, growth in the number of assessees, the volume of pending litigation and the disposal of cases by appellate authorities and constitutional courts.
The committee is also expected to examine whether the new legislation has reduced the compliance burden and made tax administration more accessible and predictable for different classes of assessees.
Mr. Mahtab said members had raised a number of queries during the meeting. Detailed responses from the Department of Revenue and the CBDT are expected within the next two to three weeks.
The committee is likely to continue its examination after receiving the requested information. Its findings could influence future administrative and policy measures concerning notices, enforcement powers, faceless proceedings, litigation management and taxpayer safeguards.
GDP Estimate Controversy Briefly Raised
The meeting also witnessed a brief reference to the controversy surrounding India’s latest Gross Domestic Product estimates.
At least one member reportedly questioned the reliability of the official growth figures in light of former Union Finance Secretary Subhash Garg’s claim that the economy expanded by only 2.6% during the June quarter, instead of the officially reported growth rate of 7.8%.
However, the issue was not discussed in detail because it did not form part of the committee’s agenda for the meeting.
The deliberations ultimately remained focused on the functioning of the direct-tax system and whether the new legal framework had meaningfully improved compliance, reduced disputes and protected taxpayers from excessive enforcement action.
