Overview

• In a new working paper, NITI Aayog proposes a shift from coercive enforcement to a trust-based regime under the Income-tax Act, 2025.
• The paper recommends fully decriminalising 12 offences, retaining criminal liability for 17 only when fraud is proven, and keeping six serious offences criminal.
• It finds 35 actions are criminalised today, with mandatory minimum jail terms for 25 and maximum terms up to seven years for 13, and urges removal of mandatory minimums to restore judicial discretion.
• The Aayog seeks to place the burden of proving fraudulent intent on tax authorities, expand civil remedies for technical lapses, and introduce pre-prosecution guidance to ensure civil options are used first.
• It specifically advises omitting Section 477 on failure to pay TCS and says the changes would reduce litigation and boost voluntary compliance, with further tax policy papers due by December after consultations with key stakeholders.