FM Sitharaman Unveils 5Rs to Build Trust-Based Tax Administration

Finance Minister Nirmala Sitharaman has outlined a new roadmap for India's tax administration, unveiling the 5Rs of Responsive Tax Governance and calling for greater tax certainty, reduced litigation and a taxpayer-centric approach during the 167th Income Tax Day celebrations organised by the Central Board of Direct Taxes (CBDT) in New Delhi.

Addressing Income Tax officials, Sitharaman said the department's role has evolved from revenue collection to building a fair, transparent and service-oriented tax administration that strengthens voluntary compliance and improves the ease of doing business. She described the Income-tax Act, 2025, which came into force on April 1, 2026, as a landmark reform that simplifies tax laws, lowers compliance costs and reduces ambiguity through streamlined provisions, a unified Tax Year concept and a digital-first framework.

The Finance Minister introduced the 5Rs Recognise, Respond, Redress, Reflect and Reform as guiding principles for responsive governance. She urged officials to promptly address taxpayer concerns, eliminate recurring systemic issues and continuously improve laws, procedures and technology. Drawing a clear distinction between honest taxpayers and wilful tax evaders, she said genuine filing errors should be corrected through a facilitative approach, while deliberate tax evasion, including concealment of income and fraudulent reporting, must invite strict enforcement.

Calling tax certainty the foundation of voluntary compliance, Sitharaman said the government's long-term objective should shift from "litigation management" to "litigation prevention" through clearer laws, consistent interpretation and continuous engagement with taxpayers and industry.

Highlighting the department's digital progress, she said the upgraded e-Filing portal handled over one crore taxpayer interactions in a day, with peak traffic touching 1.6 crore. As of July 21, more than 3.2 crore Income Tax Returns had been filed, with 94% verified and 60% processed, while over 1.3 crore refund claims were received, 96% verified and 40% processed.

Revenue Secretary Arvind Shrivastava said the department disposed of 2.24 lakh appeals in FY 2025-26, a 30% increase over the previous year, reflecting the government's focus on reducing litigation. CBDT Chairman Ravi Agrawal highlighted improvements in grievance redressal, with 94% of CPGRAMS and 95% of e-Nivaran complaints resolved. He also showcased digital initiatives including PAN 2.0, ITBA 2.0, IEC 3.0, Kar Saathi and SAKSHAM NUDGE. During the event, the Finance Minister released six flagship publications, including India's first Guidance Note on Crypto Asset Reporting Obligations, underscoring the government's push towards a technology-driven, transparent and taxpayer-friendly tax ecosystem.