No coercion: Govt places greater trust on taxpayers in Finance Bill 2026

New Delhi: The Finance Bill 2026 has proposed to decriminalise minor and technical offences under the Income Tax Act, replacing criminal proceedings with fines or penalties, a move aimed at cutting tax litigation and reducing compliance burden for corporates.

As per the bill, technical defaults such as late filing of audit reports or non-filing of transfer pricing documentation will now attract fines not legal action. The proposal is part of the new Income Tax Act's trust-based approach, which limits criminal provisions only in cases of serious and wilful tax evasion.

"This is a budget with helpful tax proposals, achieved without any revenue giveaway and with no change to the headline tax rates for corporates or individuals," said Gokul Chaudhri, president-tax, Deloitte India.


The overhaul integrates assessment and penalty into a single order, expands the updated-return mechanism, converts several penalties into capped fees and softens remaining prosecution provisions.