How will Niti Aayog’s call for decriminalisation change India’s tax laws?

New Delhi: Niti Aayog on Friday urged a comprehensive transformation of India’s tax system to create a modern and trust-based framework, promoting transparency, fairness, and voluntary compliance. The think tank’s working paper, Towards India’s Tax Transformation: Decriminalisation and Trust-Based Governance, outlined the need for a tax structure that supports both ease of doing business and ease of living.

The Aayog stressed that India’s tax laws should evolve to reflect the goals of Viksit Bharat@2047 — focusing on growth, inclusion and citizen trust. It recommended strengthening platforms such as the “Transparent Taxation – Honouring the Honest” initiative and the Jan Vishwas Act (2023), both aimed at reducing compliance burdens and fostering taxpayer confidence.

The paper called for a shift away from excessive criminalisation in tax administration. It advised that criminal provisions should be based on foundational principles, with offences clearly defined, proportionate to the harm caused, and subject to periodic review. Currently, the Income-tax Act, 2025 criminalises 35 specific actions or omissions, with mandatory minimum imprisonment prescribed for 25 of them, which limits judicial discretion.

Niti Aayog emphasised that punitive measures should be reserved for cases involving real and quantifiable harm, and that penalties should match the seriousness of offences rather than imposing excessive sanctions for minor violations.