By Mukesh Butani & Seema Kejriwal
Recently, the Central Board of Direct Taxes (CBDT) chairperson made a spirited speech on Tax Certainty Day at OECD’s Paris centre, with a manifesto for transformation. The core message—that India’s tax regime is now anchored in the trinity of simplification, technology, and trust—stands in stark relief against the shadow of historical scepticism that has long haunted the Indian tax landscape.
For decades, the global perception of India’s tax enforcement and administration machinery was one of a complex, unpredictable, and often adversarial behemoth. This scepticism was not a single flaw but a confluence of issues: complex laws, patchy drafting, and inadequate administrative guidance with cumbersome compliance, and a tendency to foster a culture of litigation. The ultimate symbol of this instability was the infamous retrospective tax amendment of 2012, which signalled to the world that policy was not sacrosanct and long-term investment was indeed a hazardous gamble.
Today, the government is going all out with confidence and a shift in tone. The chairman’s vision—articulated through the acronym PRUDENT (professional, responsible, understanding, diligent, empathetic, non-intrusive, and technology-driven)—is not just a slogan; it is a direct repudiation of the “tax terror” narrative. This weaves in support to FM Nirmala Sitharaman’s clarion call in the 2025 Budget: “Trust first, scrutinise later”.
The evidence of this shift is visible in two critical areas.
Administrative modernisation: The introduction of the faceless audit and appeal system and the transition to a data-based compliance model (such as pre-filled returns and the annual information statement) have been game-changers often initial hiccups. These reforms have measurably improved transparency, efficiency, and speed by drastically reducing human interface. Furthermore, the promise of a simplified New Income Tax Act, 2025, reduced by half and written in plain language, aims to tackle the root of legal complexity. The goal is to move the relationship from one of mandated compliance to genuine partnership and statesmanship.
What drives this push for tax certainty?
Dispute prevention and global alignment: The push for certainty is most clear in the government’s focus on dispute resolution mechanisms. India’s Advance Pricing Agreement (APA) and Mutual Agreement Procedure (MAP) programmes are seeing a triumphant surge in efficacy with India receiving an award on Certainty Day. By proactively offering certainty through APAs and providing transfer pricing safe harbours, the administration is effectively draining a swamp of litigation, particularly for businesses such as IT and IT-enabled services where the nation has experienced sustained investments in the past two decades.
This dedication to global best practices is cemented by a profoundly intrinsic, cooperative engagement with international bodies, particularly with the OECD, and simultaneously not losing sight of the UN Intergovernmental Committee on Tax, to ensure that India’s interest is not compromised in the development discourse. The chairman correctly notes that tax certainty cannot be achieved in isolation. By actively engaging with fora like the Forum on Tax Administration and the MAP Forum, India is committing to ensure its system “evolves in step with global developments” and redefines the contours of strategic cooperation.
While this progress is commendable, the journey from certainty to confidence is indeed a “continuing discipline” as was noted by the chairman. Challenges remain.
Remaining gaps
Despite the policy intent, a perilous gap often persists between the seamless experience promised by technology and the bureaucratic friction encountered by some taxpayers, leading to residual concerns over complexity and administrative efficiency. Recently, a chief commissioner-level officer remarked that to curb over-enthusiasm of one of the field officers, the observation was to “not behave like James Bond”.
While cooperating with the OECD, India navigates a delicate balance between global alignment and sovereign interest. As a large market jurisdiction, India has voiced an array of concerns—shared by other developing nations—that multilateral proposals like the two-pillar solution for digital taxation may not adequately protect its sovereign right to tax, demonstrating that even in cooperation certain points of divergence on key principles persist. In our humble view, this requires a series of concise dialogues and persuasion with multilateral bodies. Equally, it involves diplomatic engagement, just as India pauses its free trade agreements.
In conclusion, the CBDT chairman is steering the Indian tax administration out of the shadows and into a halcyon era, defined by predictable governance, as his presence has indeed made a difference. The reforms are substantive, the intent is clear, and the direction is toward a globally competitive and trustworthy regime. The ultimate success will be measured not by the vituperations of legal language, but by how quickly that old “shadow of scepticism” vanishes from the minds of investors and taxpayers.
The authors are senior partners at BMR Legal Advocates
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