FM Sitharaman urges tax officials to focus on fairer demand, faster resolution

Finance minister Nirmala Sitharaman on Friday said every tax dispute reaching court should be treated as a "system failure", urging officials to reduce litigation and adopt a more taxpayer-friendly approach ahead of the rollout of the new, simplified Income Tax Act next financial year.

"Taxpayer is not your adversary," she said, asking officials to treat citizens as "partners in nation building" and focus on clearer communication, fairer demands and faster resolution of issues.

Launching 'Prarambh 2026', an outreach campaign ahead of the April 1 implementation of the new law, Sitharaman outlined priorities including nationwide taxpayer engagement, reduction in litigation and faster responses through technology.


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"You're not just tax collectors. You're the face of the government's relationship with the taxpayer. Since you're the face of the government's relationship with the taxpayer, this new law gives you a clearer and leaner framework to make it simpler for people who want to understand it better," she said.

Invoking a song from the Hindi film Hum Hindustani, she said, "Chhodo kal ki baatein, kal ki baat purani; aao milkar likhenge hum income tax ki nayi kahani", drawing a parallel with 1960 when the film was released and the old Income Tax Act was framed.

"So, our underlying thought with a new Act should be that I trust the taxpayer," she said.

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Parliament passed the new Income Tax Bill on August 12, 2025, replacing the six-decade-old Income Tax Act, 1961. The Central Board of Direct Taxes on Friday notified the rules, paving the way for its operationalisation.

"Make paying tax so easy that honesty becomes the natural choice... If you are honest, the system will make your life easy, but if you evade, the system will find you. This message should go to the taxpayer," Sitharaman said.

She urged officials to minimise direct interface with taxpayers while retaining a "humane touch", and called for deeper engagement with young professionals and businesses.

The push underscores the government's attempt to pair a simplified tax code with administrative reforms to reduce disputes and improve compliance.

The minister outlined six expectations from the department, including nationwide outreach, reduction in litigation, faster technology-driven responses and deeper engagement with young professionals and businesses.

She asked officials to proactively explain provisions, justify demands transparently and avoid pursuing small-value cases where litigation costs exceed potential revenue. "Fighting for every rupee while spending many times more is not helping the system," she said.

Sitharaman also stressed the use of technology to ease compliance for honest taxpayers and detect evasion, adding that behavioural change within the department is as important as legal reform.