Parliamentary Committee Flags Compliance Issues in New Income Tax Act

New Delhi: The Parliamentary Standing Committee on Finance has flagged compliance-related glitches in the implementation of the new Income Tax Act and is seeking more information from the Central Board of Direct Taxes (CBDT) on its impact, including rise in tax revenue, taxpayer numbers and pending litigation.

The committee, chaired by Bhartruhari Mahtab, held a meeting on Thursday on "Direct Tax Reforms: Simplification, Rationalisation and Ease of Compliance" with representatives of the Ministry of Finance's Department of Revenue and the CBDT.

Speaking to ANI, Mahtab said the Income Tax Act 2026 came into operation from April 1 this year, and the committee wanted to understand the impact of the changes after five months of implementation.

"As you are aware, the Income Tax Act 2026 came into operation from 1st April this year. Already five months have passed. So we wanted to understand, after the rationalisation and simplification, what has been the impact relating to our income tax," Mahtab said.

He said the committee sought to assess whether the number of assesses had increased, whether revenue had increased and whether litigation had come down following the changes.

"A lot of data has been provided to us today, and it seems that as the economy is buoyant, it is happening to note that income tax revenue also has increased to a very great extent," Mahtab said.

However, he said there were also certain glitches that needed to be examined, particularly in cases pending at the appellate level and decisions in High Courts.

"There are certain other glitches also relating to cases pending in appellate level and also the number of cases being decided in the High Court where the Income Tax Department gets 14 per cent in their favour," he said.

Mahtab said the committee also discussed the functioning of technology-based tax processes and faceless decisions. He said assessees were facing certain glitches and steps were needed to mitigate these issues.

"As I said, technology has been put in place, faceless decisions are being taken, and certain glitches also are coming before the assessee. To mitigate those glitches, there need to be certain steps that need to be taken," he said.

He added that several committee members had raised concerns related to different assesses and these issues would be taken up further with the tax authorities.

The committee also discussed the level of corporate and non-corporate income tax in the country. Mahtab said India's corporate income tax is higher when compared with other emerging economies, while personal or non-corporate income tax is comparatively lower.

He questioned why non-corporate income tax was not increasing despite the number of assessees rising in large numbers.

He said the increase in the number of people filing returns suggested that compliance provisions had helped bring more people into the tax net. However, he also raised the concern that there were still a large number of people who, in his view, needed to pay tax but were not complying.

"That is one of the reasons one can say. But there are a large number of people who, I believe that they need to pay tax but they are not complying. How to go about it? That is another thing," he said.

Mahtab said the committee had raised a number of queries and the authorities were expected to come back with responses in another two to three weeks.

India's net direct tax collections rose 23.09 per cent year-on-year to Rs 8.11 lakh crore as of August 10, 2026, from Rs 6.59 lakh crore in the corresponding period last year, according to data released by the Income Tax Department.

The strong growth in direct tax collections was led by non-corporate taxes, securities transaction tax and corporate tax collections, pointing to a broad-based increase in tax receipts during the ongoing financial year.