Income Tax Day 2025: Digital transformation, reforms fuel 36% surge in tax returns filings

This year’s focus on Income Tax Day—celebrated on July 24 every year—was on the journey of digital transformation in tax administration and a slew of progressive reforms, most recently with the introduction of the Income Tax Bill 2025, which was first proposed in 1860 by Sir James Wilson. The celebration also reinforced the idea that the income tax system has become a cornerstone of nation-building, funding essential public infrastructure and services, while fostering economic equity.

The Income Tax Department also reported a 36% increase in income tax returns filed, reaching 9.19 crore in FY25, up from 6.72 crore returns filed in FY21. Gross Direct Tax Collections have provisionally touched ₹27.02 lakh crore, more than doubling in the past five years.

Digital transformation has been achieved through technological innovations, beginning with the introduction of the PAN system in the 1990s and culminating in the establishment of the Centralised Processing Centre (CPC) and TRACES, which highlights the steady transition towards automation and transparency. Moreover, Project Insight, launched in the past decade, created 360-degree taxpayer profiles using data analytics to detect evasion, thereby promoting voluntary compliance.

Recently, the Tax Information Network (TIN 2.0) was revamped and relaunched. TIN 2.0, along with platforms such as the Annual Information Statement (AIS) and Taxpayer Information Statement (TIS), has enabled pre-filled returns, reduced filing errors, and improved taxpayer convenience. The e-Verification Scheme has further eliminated the need for physical interactions, making tax compliance more straightforward and more transparent.

The Income Tax Department has also adopted behavioural economics with the launch of the Non-Intrusive Usage of Data to Guide and Enable (NUDGE) campaigns, which aim to prompt taxpayers towards compliance. With data analytics flagging potential discrepancies, the department encourages voluntary correction rather than penal action.

The Union Budget 2025-26 ushered in significant tax relief, with the new tax regime exempting income up to ₹12 lakh. For salaried individuals, income up to ₹12.75 lakh is effectively tax-free after accounting for the ₹75,000 standard deduction. These measures aim to boost middle-class consumption and savings.

Other policy shifts include doubling the interest deduction limit for senior citizens to ₹1 lakh and raising the TDS limit on rent to ₹6 lakh per annum, as well as tax exemptions for NSS withdrawals and NPS Vatsalya accounts. Additionally, the time limit for filing updated returns is being expanded from two to four years.

The newly introduced Income Tax Bill of 2025 focuses on simplification and clarity, retaining the core provisions of the existing Income Tax Act, 1961, while eliminating obsolete ones. This reflects the government’s commitment to a transparent and easy-to-understand tax system, aligned with the vision of ‘Viksit Bharat’.