Centre using 'nudge theory' to strengthen compliance: Chief Commissioner of Income Tax

Rolee Agarwal, the Chief Commissioner of Income Tax, writing about the importance of Article 265, said that with the recent reforms, the Indian government has demonstrated how it is using "the nudge theory" as a middle path to strengthen tax compliance.

The senior IRS officer wrote in an article that by simplifying return-filing, sending pre-filled forms, and providing digital reminders, taxpayers are encouraged to fulfill their obligations, not coerced.

"Compliance is strongest where trust is deepest. Our endeavour is to make taxing not a struggle but a seamless part of responsible citizenship," she wrote for Econimic Times, citing the CBDT chairman.

She said these behavioural interventions have increased revenues and expanded the tax base. She said the approach has built confidence in taxpayers that the system seeks cooperation rather than confrontation.

"The government’s push towards simplification of tax laws—with reduced exemptions, clearer structures, and predictable rates—marks a turning point in taxpayer experience. The introduction of the new Income-tax Act, 2025, aimed at clarity and consolidation, is one of the most significant reforms in decades," she added.

The IRS officer stressed that the new system minimizes litigation, cuts down ambiguity, and allows individuals and businesses to comply with tax obligations with ease.

She said that by making the law more transparent, India wants a tax regime that feels like a fair duty rather than an obligation.

She called the faceless system of assessments and appeals one of the most "transformative reforms".

She said the government has eliminated the scope for harassment and reduced discretionary powers by eliminating the physical interface between taxpayers and officials. This move, she added, instilled fairness and transparency in the system.

"Evidence shows that faceless assessments have improved compliance, increased revenue collection, and significantly enhanced the public image of the department as being taxpayer-friendly," she added.

In the article, she called Article 265 -- an Article of the Constitution of India which states that no tax can be levied or collected except by the authority of law -- the guardian of fiscal justice. She added that the Article ensures that taxation in India is lawful, transparent, and accountable.

"With reforms based on nudges, simplification, and faceless governance, the state has successfully deepened trust while enhancing revenues," she said.

She, however, said that taxpayers must shun evasion and uphold their role in society by embracing compliance in letter and spirit.