Recent reforms effectively a new direct tax code: CBDT chief

Subscribe to enjoy similar stories. New Delhi: India’s long-awaited overhaul of its direct tax regime has effectively arrived in stages, combining the simplified Income Tax Act enacted last year with a toned-down penalty and an enforcement framework under the Finance Bill 2026, and the revamped procedures and user-friendly ‘smart’ tax return forms to be rolled out later this month, Central Board of Direct Taxes (CBDT) chairperson Ravi Agrawal said in an interview.

The Income Tax Act, 2025 will replace the decades-old Income Tax Act, 1961 and is structured to simplify and streamline the country’s direct tax framework. The Act is set to come into effect from 1 April 2026.

Agrawal said the income tax rules to be issued this month under the new statute, will have simpler procedures and forms that capture data efficiently. The amendments proposed under Finance Bill 2026 seek to eliminate minimum imprisonment for offences under the Income Tax Act and reduce maximum imprisonment from seven years to two, the chairperson said.

The Bill also proposed a shift in penalty provisions from “imprisonment and fine" to “imprisonment and/or fine", giving greater discretion to courts to impose only a fine, he explained. Agrawal said the time given for taxpayers to update their tax returns was enhanced from two to four years in the last budget, and this has now been further liberalized.

“Now, we have further expanded this. Even after we issue a notice, if the taxpayer feels that the mistake ought to be corrected, the return can still be updated; pay some additional tax and the matter can be taken care of," he explained, adding that merging assessment/re-assessment and penalty proceedings into a single process will cut the time taken for