Parliamentary panel criticises India's punitive tax regime, cites overreach on September 3

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India's Parliamentary Standing Committee on Finance on Thursday criticized the country's new income tax regime, citing "punitive action" against taxpayers and significant implementation glitches. The panel, led by BJP MP Bhartruhari Mahtab, met on September 3, 2026, to discuss "Direct Tax Reforms: Simplification, Rationalisation and Ease of Compliance" with representatives from the Department of Revenue and the Central Board of Direct Taxes (CBDT).

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Members from across party lines expressed concern over the Income Tax Department's "heavy-handed approach" to enforcement, which they said granted tax officials "significant scope for overreach." A ruling party member questioned the department's methods, stating,

Why should all income taxpayers be treated as criminals? There is a spate of notices being issued, leaving taxpayers scrambling to prove that they have complied with all rules, while the rules themselves keep changing, sometimes even retrospectively.

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A key theme dominating discussions was the growing contribution of individual income taxpayers relative to corporate tax collections. Some members highlighted that in several economies comparable to India, corporate tax revenue significantly exceeds that from individual taxpayers.

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The committee also flagged compliance issues with the Income Tax Act, 2026, which came into force on April 1 this year. It requested additional data from the CBDT on the Act's impact, specifically seeking details on changes in tax revenue collections, the number of assessees, and the volume of pending litigation.

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Speaking to reporters after the meeting, Mr. Mahtab confirmed the committee's aim to assess the Act's impact after five months of implementation. He noted that income tax revenue had "increased substantially" as the economy remained buoyant.

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However, Mr. Mahtab acknowledged shortcomings in the law's implementation, particularly in reducing litigation. He pointed to glitches in cases pending at the appellate level and a low success rate for the Income Tax Department in High Courts, where it succeeds in only about 14% of cases.

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The panel also reviewed the functioning of technology-driven tax administration and faceless assessment mechanisms. Mr. Mahtab stated that assessees continued to face certain operational issues that required corrective measures. He added that several members raised concerns related to different categories of assessees, which the committee plans to pursue further with tax authorities.

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The committee has posed a number of queries and expects detailed responses from officials within the next two to three weeks.

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Separately, at least one member raised the controversy surrounding the latest Gross Domestic Product (GDP) estimates. The member questioned the reliability of official growth figures in light of former Union Finance Secretary Subhash Garg's claim that India's economy expanded by only 2.6% in the June quarter, rather than the officially reported 7.8%. This issue was not on the agenda and was not discussed further, a committee member confirmed.

", "gist": "India's Parliamentary Standing Committee on Finance on Thursday criticized the new income tax regime for its "punitive action" and implementation glitches, seeking detailed data on its impact. The panel, led by BJP MP Bhartruhari Mahtab, expects responses from tax authorities within two to three weeks on issues ranging from litigation to technology-driven assessments." }