NITI proposes decriminalisation of tax offences to transform system

In a significant push to reform India’s tax system, NITI Aayog has proposed decriminalising 12 tax-related offences under the Income-tax Act, 2025, which it deems administrative, technical or procedural defaults. The recommendation is part of the second paper in its ‘Tax Policy Working Paper Series’, titled ‘Towards India’s Tax Transformation: Decriminalisation and Trust-Based Governance’, released on Friday.

The report outlines a comprehensive strategy to overhaul the criminal provisions in the Income-tax Act, aiming to foster trust-based governance and reduce the burden on taxpayers.

“Of the 35 criminal offences identified, 12 should be fully decriminalised and addressed through civil or monetary penalties alone, including a range of administrative and technical defaults,” the report said. It also proposes that 17 offences should retain criminal liability only for fraudulent or malafide intent, removing criminal sanctions for good faith procedural lapses-thereby distinguishing fraud from honest error.

The report highlighted an over-reliance on criminal sanctions in the current framework, with 35 distinct actions and omissions classified as criminal offences, many carrying rigorous imprisonment terms of up to seven years. It notes that the existing law presumes a “culpable mental state”, placing the burden of proof on taxpayers to demonstrate their innocence.

NITI Aayog argues the approach disproportionately penalises minor, technical or procedural non-compliance, often without distinguishing between honest errors and deliberate fraud. To address this, it proposes retaining criminal liability only for cases involving fraudulent or mala fide intent, such as orchestrated tax evasion or fabricating evidence. For minor infractions, it advocates replacing criminal sanctions with civil or monetary penalties, allowing taxpayers to correct procedural defaults without facing prosecution. The report also calls for shifting the burden of proof from taxpayers to tax authorities, requiring the latter to establish wilful or fraudulent intent beyond reasonable doubt.

Further, NITI suggests removing mandatory minimum jail terms and introduces judicial discretion to decide between simple or rigorous imprisonment.

‘4 million new jobs possible in 5 years’

India’s technology sector faces significant threat of job displacements by 2031 due to AI disruption but it also has the opportunity to create 4 million new jobs in next five years, NITI Aayog said on Friday in its report on ‘Roadmap for Job Creation in AI Economy’.

The government think-tank recommended launch of a national AI talent mission — a nationally coordinated effort to transform India into the AI workforce capital of the world.