The income tax department should do everything possible to be seen as "responsible, responsive and transparent," besides adopting a policy of 'guidance over intimidation' when dealing with taxpayers, the CBDT chairman has said. On the 164th anniversary of direct tax administration in India, Ravi Agrawal, head of the country's centralised body for execution and related policy-making under the department, suggested that taxmen should follow an approach called 'PRUDENT'.
CBDT is part of the Department of Revenue in the finance ministry. It is tasked with the prompt retrieval of direct taxes payable in India. On the occasion of the 165th Income Tax Day, which was celebrated on July 24, the CBDT chief recently addressed his colleagues through an online video 'Samvaad' session - The Chairman Speaks.
The minister said the tax department has undergone a transformational change, adopting technology in all its processes with significant capacity-building initiatives, which enabled widened subdivision, and that it had shifted focus from being largely an enforcement or adversarial institution to one providing "supportive services" to help assessees maintain their compliance through non-intrusive methods.
Revenue in the direct tax category has been on the rise, with about 65 crores of PANs issued, and during the fiscal year 2023-24, there were more than 8.5 crore ITRs filed. "We have a critical role to play as part of the tax administration. We all will have to serve the citizens and businesses with professionalism as we move towards our endeavour of 'Viksit Bharat' by 2047. In this phase of starting an era (Amrit Kal), I present to you a course that should be followed by each one, irrespective of rank in the department," he expressed.
The strategy, he said, has been captured under the acronym PRUDENT, and it will serve as a blueprint for officials as they continue to navigate the "complexities" of tax administration. Speaking on PRUDENT, which stands for professionalism (P), responsible and responsive field formations of the department (R), understanding transactions and businesses from an economic perspective (U), dedication and due diligence (D), effective enforcement (E), non-intrusive administration (N), and technology-based tax administration (T).
He emphasized that professionalism should be injected into the ranks and files of tax officials by investing in capacity building and fostering adaptability. They must "do more work for taxpayer service," maintain an honest approach to fixing accountability through proposed measures like performance-management paradigms, while at the same time ensuring data-driven action from a responsive ecosystem. He stressed that decisions must be made based on solid, tested information.
The responsible and reasonable use of deep analytics and artificial intelligence should enable the department to "throw up red flags in potential cases," but how these cases are handled should focus on effective enforcement with empathy, prioritizing guidance over intimidation. "By talking about challenges taxpayers face and providing solutions, we can build an ecosystem where conversation and trust flourish," Agrawal said.
He praised the actions of his department's officers but urged them to be mindful that their subjects are human beings or entities deserving of respect. He also noted that non-intrusive governance fosters a friendly relationship with taxpayers and thus 'nicely nudges' compliance with tax laws and procedures.
Finally, he emphasized the importance of having a third-generation, tech-enabled tax administration, continuing the momentum of "process simplification," as e-filing mechanisms and allied services have significantly enhanced taxpayer ease.
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