Ravi Agarwal, Chairman of the Central Board of Direct Taxes (CBDT), dismissed speculation that the Union Budget 2025 signals the end of the old tax regime. Responding to questions about its relevance, Agarwal stated, “As on date, both the tax regimes stand, and the option is with the taxpayer—whatever the person feels is beneficial.”
In an interaction with Siddharth Zarabi, Editor of Business Today, Agarwal acknowledged that the new tax regime offers more benefits, driven by the goal of simplifying the system. “In the old tax regime, there are certain deductions and exemptions open to interpretations, making calculations complex. To address this, the new tax regime provides straightforward income tax computation with reduced rates,” he said.
This simplicity, he noted, has resonated with taxpayers, with about 74% having already adopted the new system. “I am sure that with this change brought out in the amendment in the Finance Bill, more people would be prompted to take a call on this matter,” he added.
When asked about the expected adoption rate following the Budget 2025, Agarwal projected a significant rise. “There are about 8.5 crore individual taxpayers, and of that, 75% have already opted for the new tax regime. Going forward, that number should touch somewhere around 95-97%,” he predicted.
Discussing the philosophy behind the new Income Tax Bill, Agarwal recalled Union Finance Minister Nirmala Sitharaman’s earlier remarks about simplifying the Income Tax Act of 1961. “Since then, we have worked on it for six months, and we are happy to say that we have been able to come out with the draft bill, which will be presented to Parliament,” he said. The focus has been on clarity and ease of understanding. “The language is simple, the scope for litigation goes down, promoting ease of doing business and better compliance,” Agarwal noted.
The Finance Minister highlighted that the new bill has reduced the Act’s size by nearly 50%, eliminating redundancies, outdated provisions, and duplications. “We found certain gaps and have plugged them. This is about trusting honest taxpayers first and scrutinizing later,” Agarwal remarked.
Addressing concerns about aggressive scrutiny by assessing officers, Agarwal emphasized the government’s trust-based approach. “We have about 8.75 crore taxpayers, and in 99.5% of cases, we accept returns as declared by the taxpayers. This is the trust,” he said. For the remaining cases, he clarified, scrutiny is not arbitrary but based on data analytics and red flags.
Agarwal also detailed changes to the concept of updated returns. “Initially, taxpayers had two years to update returns. Now, this has been extended to the third and fourth years,” he explained. The idea, he said, is to reduce unnecessary questioning. “If we receive information a year later, we show it in the Annual Information Statement (AIS). If the taxpayer wants to comply, there’s no need for questioning. Let the taxpayer comply voluntarily.”