New Delhi, May 4: The Central Board of Direct Taxes (CBDT) has instructed income tax officials to keep a close watch on major advance taxpayers and to detect fraudulent exemption and deduction claims, as part of its strategy to enhance direct tax revenue for the 2025–26 financial year.
According to official sources, the CBDT has recently released its Central Action Plan (CAP) for FY 2025–26, outlining key performance goals for the department, particularly in tax collection.
The Union Budget has set a target of ₹25.20 lakh crore in direct tax revenue for the current fiscal. This includes ₹10.82 lakh crore from corporate tax, ₹13.60 lakh crore from non-corporate sources such as personal income tax, and ₹78,000 crore from Securities Transaction Tax (STT).
In FY 2024–25, the department collected ₹22.26 lakh crore in net direct taxes, narrowly missing the revised target due to a record-high refund issuance. The original target of ₹22.07 lakh crore was raised to ₹22.37 lakh crore in the February Budget revision.
To improve collections, the CAP advises tax officers to conduct sector-wise analysis to identify and correct declining tax payment trends. It emphasizes close monitoring of top advance taxpayers—both individuals and corporations—and encourages them to reassess their tax liabilities if needed.
Advance tax is paid in instalments throughout the year, helping the government maintain consistent revenue flow and reducing end-of-year tax burdens for payers.
Tax officials have also been directed to flag improper exemption and deduction claims that reduce legitimate tax revenue. The CAP calls for regional revenue profiling and taking action in districts where collections fall short.
The department is expected to place greater emphasis on recovering both current and outstanding tax demands. Particular focus will be on collecting dues confirmed by the Commissioner of Income Tax (Appeals), which approved demands worth ₹1.95 lakh crore in FY 2024–25.
Efforts also include taxpayer outreach to promote awareness about proper deduction and exemption claims, as well as guidance on updated return filings — a facility for correcting previously unreported income.
These steps aim to encourage more taxpayers to opt for the simplified new tax regime, which offers flat rates without exemptions or deductions, thereby limiting opportunities for misuse.
Additionally, the department has been advised to issue refunds promptly to avoid excess interest payments and negative budget impacts. Refunds hit a record ₹4.76 lakh crore in FY 2024–25, up 26% from the previous year.
The CAP also highlighted a sharp increase in tax arrears, now totaling ₹48.17 lakh crore, and stressed the need to bring this down to a more manageable level.
