In a significant move to streamline tax administration, the Income Tax (I-T) Department has set an ambitious goal to resolve over 2 lakh tax disputes, involving a disputed amount of ₹10 lakh crore, at the first appeal level during the financial year 2025-26 (FY26).
This target marks a substantial increase from FY25, where the department successfully disposed of 1.72 lakh appeal cases at the Commissioner of Income Tax (Appeals) [CIT(A)] level. Those cases involved a total disputed amount of approximately ₹6.3 lakh crore.
Boost in Tax Collection and Business Liquidity Expected
Historically, the Revenue Department manages to recover nearly one-third of the disputed amount through these appeal-level settlements. If the FY26 target is achieved, it could lead to a significant increase in tax collections and free up much-needed liquidity for businesses, many of which have funds tied up in pending tax demands. CIT (Appeals) often cancels tax demands that are deemed non-recoverable, which helps taxpayers reduce unnecessary financial pressure.
Outstanding Tax Dues Reach ₹48.18 Lakh Crore
As of April 1, 2025, total outstanding income tax dues — including those not yet due — stand at ₹48.18 lakh crore across 2.29 crore pending cases. This growing backlog has prompted the Central Board of Direct Taxes (CBDT) to implement aggressive measures for dispute resolution and cash recovery under its Central Action Plan for FY26.
FY26 Goals: Higher Recoveries and Demand Reduction
For FY26, the CBDT aims to:
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Collect ₹5 lakh crore in net recoverable taxes
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Reduce overall tax demand by ₹8.25 lakh crore
This strategic focus aligns with the government’s broader objective of improving tax efficiency and reducing the burden on honest taxpayers.
Record Growth in Appeal Disposals in FY25
The previous financial year saw a record 55% increase in appeal disposals compared to FY24. Out of the total 1.72 lakh appeals resolved:
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₹1.95 lakh crore in tax demand was fully upheld
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₹2.25 lakh crore was partially confirmed
Tax experts believe this performance reflects the government’s proactive stance toward resolving tax disputes swiftly and fairly.
Relief for Small Taxpayers and Sectoral Focus
To reduce the caseload and offer relief to individuals and small businesses, the I-T department is prioritizing appeals involving disputed amounts up to ₹1 lakh, which make up a large portion of pending cases. Moreover, tax officers have been instructed to analyze sector-wise performance, monitor top advance tax payers, and verify claims for deductions and exemptions closely.
Older Tax Demands Likely to Be Written Off
In line with recovery efficiency, older tax demands (over five years) are more likely to be reviewed or written off, especially if they are under insolvency proceedings or pending corrections. On the other hand, recent demands (less than one year old) are seen as the most viable for recovery.
FY26 Direct Tax Collection Target Set at ₹25.2 Lakh Crore
To support India’s fiscal goals, the government has set a direct tax collection target of ₹25.2 lakh crore for FY26 — a 13.2% increase from the previous year. The CBDT has directed assessing officers to maximize recoveries on confirmed demands and contribute actively toward achieving this milestone.
Conclusion:
The I-T department’s focus on resolving high volumes of tax disputes at the first appeal level in FY26 could mark a turning point in India’s tax administration, fostering greater transparency, easing compliance burdens, and unlocking capital for growth-focused enterprises.