EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients.
Recent Searches
Indian Government’s Public Policy Think Tank, NITI Aayog, recommends decriminalization of various tax-related offences and procedural defaults
This Tax Alert summarizes the Indian Government’s Public Policy Think Tank, Niti Aayog’s, paper titled ‘‘Towards India Tax Transformation: Decriminalising and Trust-Based Governance” (Paper) [1] published in October 2025. Out of the various themes that have been identified by the ‘Consultative Group on Tax Policy’ formed by NITI Aayog to facilitate ease of doing business, promote Foreign Direct Investment (FDI), simplify tax laws and processes and make the system future-ready, this Paper focusses on recommending measures to decriminalize the old stringent provisions resulting in prosecution even for minor or technical defaults under Income Tax Law [2] (ITL). This Paper aims to recommend a move from a fear-driven compliance model to a cooperative, trust-based system that reserves criminal prosecution only for deliberate, fraudulent tax evasion.
The Paper outlines the four foundational principles for criminalization: (1) it should protect fundamental societal values such as law and order, national security and property; (2) only those conducts causing clear and substantial harm should be criminalized; (3) criminal law should be used as a last resort when civil or administrative remedies are inadequate; and (4) punishment must be proportionate to culpability. The Paper also emphasizes that drafting of offences must be precise, non-duplicative and periodically reviewed to remove the outdated provisions.
The Paper, applying these principles, categorizes its recommendations on different offenses under ITL into three groups: (a) 12 offences to be fully decriminalized, (b) 17 offences to be partially decriminalized and (c) 6 offences to be retained as criminal with proportionate punishment.
Further, the Paper also recommends rationalizing the punishment framework which include abolishing mandatory minimum sentences that restricts judicial discretion, aligning imprisonment terms with the Bharatiya Nyaya Sanhita [3] , suggesting shift from rigorous imprisonment, removing the presumption of guilty intent, and simplifying legal drafting under the SARAL (Simple, Accessible, Rational, and Actionable Law) principle.
1 https://niti.gov.in/sites/default/files/2025-10/Report_Tax_Policy_Working_Paper_Series_II.pdf
2 Income-tax Act, 1961 read with Income-tax Rule, 1962. Now, revamped by Income-tax Act, 2025 w.e.f. 1 April 2026
3 The Bharatiya Nyaya Sanhita (BNS), 2023, is India's new criminal law code that replaced the Indian Penal Code, 1860 (IPC)