Tax landscape in 2025: The year of structural simplification - Certainty, technology, and trust in 2026

By Jayesh Sanghvi and Shalini MathurIndia approaches 2026 with the tax landscape that is poised for a transformative shift. 2025 was the year of structural simplification, signalling 2026 to be the year making tax systems more predictable, technology-driven and citizen-centric.The Drivers of Change: Income Tax Code, Litigation Management, and GST 2.0The New Income Tax Act, 2025 is expected to be the cornerstone of structural reform. By rationalizing provisions, reducing ambiguities, and aligning with global best practices, the Act aims to simplify compliance by creating a framework that is easier to understand and apply, including for individuals and small businesses.This shall continue to catalyse voluntary compliance and broadening the tax base. Besides simplification, focused measures like the comprehensive Form 26AS, Annual Information Statement and pre-filling tax returns have helped improve compliance, resulting in direct tax collections growing at a CAGR of 23.8% in last 5 years (FY21 to FY25): The number of IT returns filed have increased by over 25% in the last 5 years (FY21 to FY25). The government has taken initiatives to unlock the amounts locked in income tax disputes including the Vivad Se Vishwas scheme, increasing monetary limits for departmental appeals and concluding APA resolutions.The dual-rate structure of 5% and 18% in GST is a landmark simplification to boost competitiveness and alleviate cascading impact. Technological sophistication of GSTN with e-invoicing and automated reconciliations have tremendously broadened the base and increased revenue collection. Unique GST registrants have increased from 0.9 cr in 2017 to 1.56 crore today (59% increase). GST collections have also shown growth. 2026: Should be about redefining the relationship between taxpayers and the administration through certainty, technology, and trustControversy managementThe first appellate level (CIT – Appeals) has over 5.3 lakh cases pending resolution aggregating Rs 17 lakh crore, with 55,054 cases involving demands of above Rs.10 crore. To expedite tax dispute resolution, the government should prioritize high value appeals and leverage video hearings for efficiency. Introducing a time-bound mediation mechanism can ease CIT(A) workload. Over 300 Board for Advance Ruling matters remain pending, highlighting the need for reconstituted authorities and timely rulings. With 858 APAs pending, rationalizing safe harbour rules and fast-tracking renewals will enhance certainty and reduce litigation.Rationalise compliancesToday, given the multiplicity of compliances, even a small / mid-sized business has to devote significant time on various income tax and GST compliances monthly, periodically and annually besides real time responses to audits/ queries. The government has now the opportunity to realign these compliances and remove potential duplicity through intelligent data management and inter-departmental coordination. Customs and GST transformationA one-time dispute resolution scheme under Customs Law, similar to the 2019 Sabka Vishwas initiative, will help settle legacy cases. To enhance ease of doing business, automation should be accelerated through API connectivity for filing Bills of Entry, making duty payments, and leveraging the ICEGATE portal for secure, high-volume data transmission. For GST 2.0, priorities include centralized audits for PAN-India suppliers, addressing inverted duty structures, enabling refunds on input services and capital goods, and further rationalizing rates. Additionally, decriminalizing GST law by introducing a negative list for non-prosecutable cases like interpretational or clerical errors will significantly reduce compliance burdens.2026: The Rise of Tax-Tech IntegrationIf 2025 was about laying the foundation, 2026 should be about execution. Technology will no longer be an enabler; it should be the backbone of tax administration.The Road Ahead: Building Trust Through TransparencyStructural simplification is not just about reducing complexity; it’s about building trust. Transparent systems, clear communication, and predictable outcomes will foster confidence among taxpayers. Initiatives like real-time grievance redressal, open APIs for tax intermediaries, and data privacy safeguards will reinforce the belief that compliance is not a burden but a collaborative process.For small businesses, these reforms mean fewer touchpoints with the tax department, faster refunds, and certainty in tax positions. For individuals, it translates into intuitive filing experiences and reduced chances of disputes. Thus, the convergence of policy and technology in 2026 will redefine India’s tax ecosystem. (Jayesh Sanghvi is Tax Partner, EY India and Shalini Mathur is Director – Tax & Economic Policy Group, EY India)