The income tax department has established a bold objective to resolve more than 200,000 cases, involving a total disputed amount of Rs 10 lakh crore, currently pending before the first stage of appeal in this financial year.
In comparison, over 172,000 cases were successfully settled at the Commissioner of Income Tax (Appeals) level in FY25, with the disputed amount around Rs 6.3 lakh crore.
Historically, the revenue department tends to collect approximately one-third of the disputed sums soon after such mutual agreements are reached.
If the targeted cases are resolved by the CIT (Appeals) in FY26, it could not only lead to a significant increase in tax revenues but also enhance the liquidity of numerous businesses. This would enable them to cover operational expenses and potentially expand capital investments. The CIT (Appeals) often withdraws demands in cases where the amounts are evidently unrecoverable.
As of April 1, 2025, the total income tax arrears, including demands not yet due, are estimated at Rs 48.18 lakh crore across 22.9 million entries.
Given the continuous growth of arrears and cash collections, it is crucial to take comprehensive steps to change this trend and reduce the disputed amounts to more manageable levels, according to the CBDT’s Central Action Plan for 2025-26.
The CBDT has set a “net collectable demand” target of just over Rs 5 lakh crore for FY26, alongside an aim to reduce demands by Rs 8.25 lakh crore, as reported by sources.
It is notable that in FY25, the appeal disposal rate was 55% higher than in the previous year, marking an all-time high. The total number of appeals resolved at the CIT level was 172,361, with fully confirmed demands in favor of the revenue department amounting to Rs 1.95 lakh crore, and another Rs 2.25 lakh crore confirmed in part.
Amit Maheshwari, Tax Partner at AKM Global, stated, “This reflects the government’s dedication to alleviating the burden on honest taxpayers and enhancing the efficiency of the tax administration.
The Central Board of Direct Taxes (CBDT) has advised assessing officers to ensure that every effort is made to collect confirmed outstanding demands from the CIT (Appeals) stage.
The likelihood of demand reduction increases with the age of the demands, as older cases are more likely to be resolved through appeals, insolvency processes, or corrections. Demands older than five years are assigned the highest probability for reduction, whereas newer demands (less than one year) are considered more likely to be collected.
Among the various categories of pending appeals, those under Rs 1,00,000 have been prioritized to provide relief to a significant number of small taxpayers, as it was identified that many pending appeals fall within this range.
For Budget FY26, a direct tax collection target of Rs 25.2 lakh crore has been set, reflecting a 13.2% increase from the previous year.