In an exclusive interaction with Fortune India, Ravi Agrawal, Chairman, Central Board of Direct Taxes (CBDT), tells Fortune India that the direct tax provisions in the budget need to be look at in continuity with the measures taken over the past couple of years. The measures, Agrawal says, are aimed at ease tax clarity, certainty and of doing business. Edited excerpts:  

Budget 2026-27 is more about foundational steps taken towards the developed economy goals. There are a number of announcements on the direct tax front too. Which announcements in your view align with the larger aim of Viksit Bharat?  

Ravi Agrawal: When we move to the next financial year beginning April 1 this year, we will be having a different Income Tax Act altogether. So, the foundational initiatives have to be seen in the context of the exercise that has been undertaken and the progress that has been made on the direct tax front in the last two years. It is important to note that the proposals in this budget are in continuation. Those cannot be seen in isolation.

Last year, we presented the Income Tax Bill, 2025, to replace the Income Tax Act, 1961. Parliament passed it in August. Let us look at what has actually been happening. The priority has been to keep the policy side untouched and focus on simplification and reducing redundancies. It had its own value. Clarity and simple language reduce chances of litigations. At that time, we did not touch the policy side consciously. It was just translated or converted into simple language.

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So what next and how will the tax department build from here in terms of a progressive tax system to suit the needs of the fastest growing global economy?

So, once the bill was passed last year, we started working on the forms and the rules, which will be notified within this month. Firstly, two steps have been taken together. To make the income tax law simple and concise and easy to implement. Third involves process changes. Litigation, multiplicity of proceedings, criminality associated with the defaults were the pain areas and needed intervention for the purpose of ease of doing business.

Then, clarity on certain provisions was needed. Those issues have now been taken care of in the budget. Decrimialisation is happening, litigation is being reduced and disputes are getting resolved.

Tax litigation has been one of key challenge. What is the strategy going forward?

Reducing litigation has two components. First, can the dispute be resolved at a particular stage of the process so that it does not get carried forward. Second is to minimize the proceedings as such. So, both have been taken care of in this budget. Consolidation of assessment with penalty proceedings has been done. And provisions have been made to convert penalty into fees. So, therefore no separate processes are required for penalties. It is understood and well known that delay will lead to automatic fees.  Next is is resolving the case. At every stage of proceeding, we have provided an opportunity to the tax payer to pay up and not pursue the case further.

Also read: Budget 2026: Direct tax proposals retain focus on growth, compliance, and ease for taxpayers

Certain retrospective amendments have been made to the Income Tax Act, 1961. What was the thought behind those changes?

Clarifications have been provided. Those have been done retrospectively because there were a lot of interpretations have been coming in. Courts were interpreting certain provisions and sections in a different manner. Therefore, that certainty has been provided. If all these initiatives are taken together, when we have a new tax administration from April 1 this year, it will be backed by an Act, which is simple, easy to understand and contains these process changes. 

What, according to you, are the other tax certainty and other key measures in the budget?

Tax Clarity on data centers is an important measure taken in the budget. We have retained the sovereignty but yet provided clarity. The other key measures include providing clarity and certainty through safe harbour rules, and fastracking advance price agreement (APA) processes. Then exemption on inward supplies to manufacturers in bonded zones and toll operators are other significant initiatives. Others being rationalizing of share buybacks, and minimum alternate tax rates.

Coming to the personal income tax, how many assesees have shifted to the concessional tax rate, especially as the previous budget gave a major relief of nil tax on annual income up to Rs 12 lakh?

86% tax payers have adopted the new tax regime, compared with 75% last year. If you look at the filers who file ITR1, 2, 3 and 4, 88% of such filers have shifted to the new concessional tax regime, compared with 76% last year.

One of the trends witnessed this year has been of considerable low refunds. Revenue buoyancy is also a concern. Is it fair to assume that whatever buoyancy is visible in the current year’s direct tax mop up is attributed to lower refunds? What is your take?

No, I would say that we have to look at it in a different perspective. Refund being low this time has multiple components. See, about 95% of the refunds, in terms of numbers, have already been processed. The second is that in the last two years, we have been rationalising the tax rates also, including the TDS rates. So, if TDS rates are being rationalized, it naturally has an impact on the claims refunds. So the refunds claimed would also be lesser compared with the last year.

Another factor being arrear refunds last year. Having said that, 5% refunds are pending. You would recall that this year, corporate returns were filed late. The other important factor is that we had done the exercise of verifications and nudges, wherein multiple bogus claims also came up. I am hopeful that in February we should be able to release all the refunds.