Is the Govt planning further simplification of personal income tax? Finance Ministry replies

The government is not considering any further simplification of the personal income-tax regime at present, the Finance Ministry informed Parliament on 16 December.

Responding to an unstarred question in the Rajya Sabha, Minister of State for Finance Pankaj Chaudhary said that the personal income-tax regime without deductions was recently simplified through the Finance Act, 2025, which introduced liberal tax slabs and higher rebates.

“There is no further proposal under consideration in this regard,” the minister said.

The response came to a question raised by Rajya Sabha MP A. D. Singh, who sought clarity on whether the government plans to further simplify the personal income-tax regime, the steps taken to widen the tax base using technology, and the status of tax litigation.

While ruling out further simplification of tax rules, the Finance Ministry said the government is now focusing on widening the tax base and reducing evasion through technology-driven measures.

Taxpayers are being alerted through SMS, emails, portal prompts, and outreach programmes to file revised, belated, or updated returns where required.

The ministry said analytics-based campaigns have been undertaken for issues such as foreign asset disclosures, non-genuine deductions, virtual digital asset (VDA) reporting, and TDS compliance.

Tracking non-filers and high-value transactions

To further widen the tax base, the Income Tax Department has implemented the Non-Filer Monitoring System (NMS), which uses third-party data such as Statements of Financial Transactions (SFT), TDS, and TCS to identify individuals and entities undertaking high-value transactions without filing income-tax returns.

Financial data collected from reporting entities is also reflected in the Annual Information Statement (AIS), enabling taxpayers to review and reconcile their financial transactions online.

Cases for scrutiny, the government said, are selected through a rule-based, automated system driven by data received from multiple sources.

Budget 2025

Along with this, the government introduced a new set of income-tax slabs under the new regime. Income up to ₹4 lakh remains tax-free, while income between ₹4 lakh and ₹8 lakh is taxed at 5%. Earnings from ₹8 lakh to ₹12 lakh attract a 10% tax, followed by 15% on income between ₹12 lakh and ₹16 lakh.

Higher slabs include 20% tax on income between ₹16 lakh and ₹20 lakh, 25% on ₹20 lakh to ₹24 lakh, and 30% on income above ₹24 lakh. As a result, taxpayers earning up to ₹12 lakh effectively pay zero tax under the new regime.