'PM Modi put me on a special project': FM Nirmala Sitharaman unveils govt's efforts to simplify tax system

In her first video interview since presenting the Union Budget 2025-26 on Saturday, Union Finance Minister Nirmala Sitharaman shared insights on the government’s ongoing efforts to simplify India's direct tax system. Addressing a key concern among taxpayers, Sitharaman highlighted the government's commitment to reducing compliance burdens and making the Income Tax Act more user-friendly.

Talking to PTI, she explained that simplifying direct taxation has been a long-standing priority. "There are a couple of things, which have been in the works for some time. One is the thought that the direct tax should be made simple and that it should be easy for compliance," Sitharaman said. She also pointed to the need for the tax framework to become more transparent, reducing any ambiguity that has often been seen as a source of inefficiencies and potential misuse.

In the July 2024 Budget, the government took a step toward this goal by announcing plans for a new Income Tax Act. Sitharaman emphasised that the reform effort aims to simplify language, lessen the compliance burden, and address various interpretations that could lead to issues like rent-seeking.

The Finance Minister also revealed the significant public feedback received during her travels, where many taxpayers expressed pride in fulfilling their duties but sought further support from the government. "The voice which came wherever I travelled was 'we are proud taxpayers, we are honest taxpayers, we want to continue to serve the country by being good taxpayers. But would you think about the kind of things you can do for us?'" she recounted.

In response, Sitharaman engaged in discussions with Prime Minister Narendra Modi and received guidance to refine the tax system. "I had this discussion with the honourable PM, who put me on this specific assignment to 'see what you can come up with,'" she said. As a result of these consultations, the ministry worked on the plans that are set to be unveiled in the 2025-26 Union Budget, reflecting a taxpayer-friendly approach.

During Budget 2025, Sitharaman announced that Indians whose income is up to Rs 12 lakh per annum, would have zero tax burden. She also cut rates for those earning above that threshold.