With an ambitious direct tax collection target of Rs 25.2 trillion for FY 2025-26, the CBDT has directed income-tax officials to intensify scrutiny of top advance tax payers and root out bogus claims of exemptions and deductions. The move is part of the recently issued Central Action Plan (CAP) for the fiscal year, which lays out strategic goals for tax administration and revenue maximization.
According to official sources, the CBDT's CAP outlines "key performance areas" to ensure robust tax collection, timely refund issuance, and targeted enforcement actions. The strategy involves close monitoring of high-value taxpayers, including individuals and corporates, to verify the accuracy of advance tax payments - a system allowing taxes to be paid in instalments throughout the year.
FY26 Targets and Sectoral Strategy
The Union Budget has set the Income Tax Department's FY26 targets as follows:
- Rs 10.82 lakh crore from corporate tax
- Rs 13.6 lakh crore from non-corporate sources (including personal income tax)
- Rs 78,000 crore from Securities Transaction Tax (STT)
To meet these targets, the department is tasked with undertaking sectoral analysis to detect declining tax trends and anomalies in specific industries or regions. Tax officials have also been instructed to "profile districts" based on net revenue performance and initiate action in areas showing negative or sub-par collection trends.
Focus on Exemptions, Deductions, and Appeals
One of the key directives is to identify incorrect or inflated claims of deductions and exemptions under various sections of the Income Tax Act - practices that significantly dent genuine revenue collections. Simultaneously, the plan mandates proactive efforts to collect outstanding tax arrears and confirmed tax demands, especially those upheld by the Commissioners of Income Tax (Appeals).
In FY 2024-25, the CIT (Appeals) confirmed tax demands worth Rs 1.95 trillion, which the department now aims to recover within the ongoing financial year.
Refunds, Compliance, and Outreach
The CBDT has asked for prompt processing of refunds to avoid unnecessary interest payments and to minimize fiscal pressure on the Union Budget. During FY25, the department issued a record Rs 4.76 trillion in refunds - up 26.04% from the previous year's Rs 3.78 trillion.
Recognizing the need to reduce taxpayer disputes and enhance compliance, the CAP recommends conducting taxpayer outreach and education programmes, focusing on:
- Filing updated returns
- Making accurate deduction claims
- Encouraging shift to the new tax regime, which allows lower tax rates without exemptions - potentially reducing misuse and litigation
Reducing Arrear Burden
The CAP has also prioritized reducing the massive Rs 48.17 trillion in arrear tax demands, which continues to be a concern. Tax officers are expected to use all available tools to bring this number down to a "manageable" level.
Conclusion
The CBDT's FY26 action plan signals a tighter compliance environment where high-value taxpayers and frequent deduction claimants may face increased scrutiny. With digital analytics, real-time profiling, and a sharp focus on arrears and appeals, the tax department is gearing up for a more targeted, efficient and data-driven enforcement regime.
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