{"id":495,"date":"2026-01-15T07:27:24","date_gmt":"2026-01-15T07:27:24","guid":{"rendered":"https:\/\/jupitice.com\/blog\/?p=495"},"modified":"2026-02-05T10:00:52","modified_gmt":"2026-02-05T10:00:52","slug":"trust-proportionality-and-the-future-of-tax-enforcement-in-india","status":"publish","type":"post","link":"https:\/\/jupitice.com\/blog\/trust-proportionality-and-the-future-of-tax-enforcement-in-india\/","title":{"rendered":"Trust, Proportionality, and the Future of Tax Enforcement in India"},"content":{"rendered":"

\"NITI<\/p>\n

The income-tax enforcement policy has been decades-old and based on the concept of deterrence. Even small violations of compliance, simply ignored, may open the door to criminal prosecution. The logic was clear: tax evasion hurts public finance, and only strong penalties could discourage bad actors. However, this strategy has resulted in a culture of excessive compliance, intimidation and lawsuits as well. A wrong record or a deadline that has been missed may not only lead to reprimand, but prosecution.<\/span><\/p>\n

The working paper of NITI Aayog on the Income-tax Act, 2025 this year is a pivotal change in the line of thinking. The piece does not simply critique the text of the new law- it challenges the very structural form of the Indian tax system, in general, with regard to criminal liability. It is a basic concept, law must distinguish between mistake and will, and punishment must be equal to the damage.<\/span><\/p>\n

A Reform Decades in the Making<\/b><\/h2>\n

The new Income-tax Act, 2025 was aimed at substituting the old-fashioned 1961 system. While it does streamline certain aspects and removes thirteen outdated offences, it still lists 35 actions as criminal, many of which are administrative in nature. Twenty-five of these carry mandatory minimum imprisonment. Each of them can bring jail, as well as fines.<\/span><\/p>\n

NITI Aayog argues that this is excessive. Their stand is not rooted<\/span> in ideology but on a simple principle, which states that criminal sanctions are to be applied in case of serious, fraudulent activities. Even the administrative lapses that are inconvenient, or non-compliant do not necessarily warrant custodial sentences.<\/span><\/p>\n

Reframing the Question: When Should Tax Defaults Be Crimes?<\/b><\/h3>\n

One of the paper\u2019s most valuable contributions is its framework for evaluating when criminal law should apply. It sets out five criteria: the offence must protect a core societal value; involve real and significant harm; be best addressed through criminal law; be proportionate; and be clearly drafted with scope for periodic review.<\/span><\/p>\n

Through these principles, the paper makes three major conclusions. To begin with, 12 out of the 35 crimes ought to be decriminalised. Second, another 17 should attract criminal liability only if fraudulent or malicious intent is clearly established. And third, only 6 offences\u2014those involving deliberate evasion or tampering\u2014should remain fully criminal.<\/span><\/p>\n

This is not decriminalisation for its own sake. It is an argument for fairness, legal clarity, and institutional credibility.<\/span><\/p>\n

Procedural Defaults and Criminal Overreach<\/b><\/h3>\n

The paper also identifies areas in the new Act that are most overreaching. These are not hypotheticals but actual instances of how the law as it stands does not leave much to discretion:<\/span><\/p>\n