Prosecution Provisions under Income-tax Act, 2025 Explained

Introduction

The Income-tax Act, 2025 introduces a reorganised and streamlined framework for prosecution provisions. While the core objective of penalising serious tax offences remains unchanged, the new Act restructures sections, simplifies language, and improves clarity for taxpayers and professionals.

This blog explains how prosecution provisions have been structurally reorganised under the Income-tax Act, 2025 compared to the Income-tax Act, 1961.

What Are Prosecution Provisions?

Prosecution provisions deal with criminal proceedings initiated by the Income Tax Department for serious defaults such as:

Wilful tax evasion

Failure to file returns

Non-payment of TDS/TCS

False verification or falsification of accounts

These provisions go beyond monetary penalties and may result in imprisonment and fines.

Structure under Income-tax Act, 1961

Under the 1961 Act:

Prosecution sections were scattered across different chapters

Multiple amendments over decades made interpretation complex

Overlapping provisions often caused litigation

Procedural clarity was limited

Reorganisation under Income-tax Act, 2025

The 2025 Act focuses on structural clarity by:

Grouping prosecution-related provisions logically

Using simpler and consistent terminology

Clearly distinguishing between technical defaults and serious offences

Aligning prosecution triggers with modern compliance systems

The intent is to reduce unnecessary prosecutions while ensuring strict action against deliberate tax evasion.

Key Structural Changes

Better sequencing of prosecution sections

Clear linkage between default, intent, and punishment

Improved harmony with penalty and compounding provisions

Reduced scope for discretionary misuse

Impact on Taxpayers and Professionals

Genuine taxpayers get better protection

Reduced fear of prosecution for procedural lapses

Easier advisory and compliance for professionals

Faster and more predictable enforcement

Conclusion

The prosecution framework under the Income-tax Act, 2025 reflects a shift towards clarity, fairness, and proportional enforcement. While strict action continues for serious offences, the reorganised structure ensures that prosecution is used as a last resort rather than a routine compliance tool.

Understanding these changes is essential for taxpayers, businesses, and professionals operating under the new law.

Written by:
Abhishek Gupta
Chartered Accountant
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