Parliamentary panel branded ‘repressive’ tax regime, seeks data on impact of new income tax law

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Cross-party members of Parliament’s Standing Finance Committee criticized the current income tax regime at a meeting on Thursday (3 September 2026) for relying too much on what they described as “repressive measures” and giving tax officials considerable leeway.

A panel headed by BJP MP Bhartruhari Mahtab met to discuss ‘Direct Tax Reforms: Simplification, Rationalization and Ease of Compliance’ with representatives of the Department of Revenue, Ministry of Finance and the Central Board of Direct Taxes (CBDT).

The committee also highlighted compliance glitches in the implementation of the Income Tax Act, 2026 and sought further information from the CBDT on its impact, including changes in tax revenue collection, number of assessees and volume of pending litigation.

Latest GDP data

According to sources, at least one member has sparked controversy over the latest gross domestic product (GDP) estimates, questioning the reliability of official growth figures over former Union finance minister Subhash Garg’s claim that India’s economy grew by only 2.6% in the June quarter instead of the official 7.8%.

“This topic was not on the agenda today, so it was not discussed further,” said a member of the committee.

Two themes dominated the discussions. Firstly, members expressed concern about the increasing contribution of individual taxpayers in relation to the collection of corporate income tax. Some have pointed out that in several economies comparable to India, corporate tax collections far exceed collections from individual taxpayers.

Second, members criticized what they saw as the Income Tax department’s heavy-handed approach to enforcement.

“Why should all taxpayers be treated like criminals? Lots of notices are issued, so taxpayers are trying to prove that they have followed all the rules, while the rules themselves are constantly changing, sometimes even retroactively,” said a member of the ruling party.

Speaking to reporters after the meeting, Mr. Mahtab said the Income Tax Act 2026 came into force on April 1 this year and that the committee wanted to assess its impact after five months of implementation.

He said the panel sought to examine whether the number of assessees increased, whether tax revenue increased and whether the number of lawsuits fell after the changes.

“We’ve been given a lot of data today and it appears that as the economy remains on the upswing, income tax revenues are up substantially as well,” he said.

Reducing the number of lawsuits

However, Mr. Mahtab acknowledged shortcomings in the implementation of the law, especially in reducing the number of lawsuits.

“There are some glitches related to the cases heard at the appellate level and also the number of cases decided in the High Courts where the Income Tax Department succeeds only in about 14% of the cases,” he said.

The committee also discussed the functioning of technology-driven tax administration and anonymous assessment mechanisms. Mr. Mahtab said that the assessees continue to face certain operational issues that require corrective action.

“Technology has been introduced, anonymous decisions are taken and certain glitches are brought before the assessee. Certain steps need to be taken to mitigate these glitches,” he said.

The MP added that several members had raised concerns regarding different categories of assessees and that these matters would be taken up further with the tax authorities.

Mr Mahtab said the committee had asked a number of questions and expected detailed answers from officials in the next two to three weeks.

Published – 03 Sep 2026 20:57 IST