Central Board of Direct Taxes (CBDT)

Every year, crores of Indians file an income tax return. Behind that system sits one body: the Central Board of Direct Taxes, or CBDT. For over 60 years it ran the Income Tax Act, 1961. From 1 April 2026, it runs a brand-new law. This lesson explains what the CBDT is, how it began, what the new law changed, and the 2026 scheme for hidden foreign assets.

1What is the CBDT, and who runs it?

Must Know

India has two big tax bosses. One handles taxes on what you earn. The other handles taxes on what you buy. The CBDT is the first one.

• The CBDT runs India’s direct taxes, mainly income tax.
• It works under the Department of Revenue, in the Ministry of Finance.
• It gets its powers from the Central Boards of Revenue Act, 1963.
• It also heads the Income Tax Department, which collects the tax.
• Its sibling board, the CBIC, handles indirect taxes like GST and customs.

Who sits on the board?

• The board has a Chairman and six Members.
• All of them come from the Indian Revenue Service (IRS).
• The Chairman ranks as an ex-officio Special Secretary. Each Member ranks as an ex-officio Additional Secretary.
• The Chairman is Ravi Agrawal, a 1988-batch IRS officer. He took charge on 1 July 2024.
• In June 2026, his term was extended by six months, to 31 December 2026. (Business Standard)

2How did the CBDT begin?

Must Know

• Income tax first came to India in 1860, under British rule. Sir James Wilson brought it in.
• It began on 24 July. That is why 24 July is marked as Income Tax Day.
• In 1924, the Central Board of Revenue was set up. It handled both direct and indirect taxes.
• The job grew too big for one board. So on 1 January 1964, it was split in two.
• The CBDT took direct taxes. The Central Board of Excise and Customs (CBEC) took indirect taxes.
• When GST came in 2017, CBEC was renamed the CBIC, the Central Board of Indirect Taxes and Customs.

3What changed with the Income-tax Act, 2025?

Must Know

The 1961 Act was amended again and again for 65 years. It grew long and hard to read. Even experts argued over what it meant. So the government wrote a fresh law.

The long road to a new law

• In November 2017, a task force was set up to draft a new direct tax law. Its first convener was Arbind Modi, a CBDT Member.
• It later worked under Akhilesh Ranjan, and gave its report in 2019.
• The Income-tax Act, 2025 was passed by Parliament in 2025.
• It came into force on 1 April 2026, replacing the 1961 Act.

What is different?

• The new Act has 536 sections in 23 chapters. The old one had more than 800 sections.
• The old law used two terms: “Previous Year” (when you earned) and “Assessment Year” (when you were taxed).
• The new Act uses one term: “Tax Year”.
• It applies from Tax Year 2026-27 onwards.
• The aim is a shorter, clearer law, with lower costs and fewer disputes.

4How is the CBDT changing the way it treats taxpayers?

Good to Know

A tax office can act like a police station or like a help desk. The CBDT says it wants to be more of a help desk for honest taxpayers.

The PRUDENT approach

• The CBDT’s Central Action Plan 2026-27 is built on the word PRUDENT. (Business Today)
• It stands for Professionalism, Responsibility, Understanding of law and business, Data-driven decisions, Enforcement with empathy, Non-intrusive administration, and Technology-driven processes.
• Faceless assessment is one tool. Cases are handled online, so the taxpayer and officer never meet.

Income Tax Day 2026 and the 5Rs

• On 24 July 2026, the 167th Income Tax Day was marked in New Delhi.
• Finance Minister Nirmala Sitharaman set out the 5Rs of Responsive Tax Governance: Recognise, Respond, Redress, Reflect and Reform.
• She said honest taxpayers should get a chance to correct genuine mistakes.
• She also called for less litigation and more tax certainty.
• The CBDT Chairman listed tech upgrades such as PAN 2.0 and ITBA 2.0. (PIB)

5How have exams tested the CBDT and tax reform?

6What is FAST-DS, the 2026 foreign asset scheme?

Current Affairs

Many Indians study or work abroad. Some open a foreign bank account or get shares from a foreign employer. Then they forget to report it in their Indian return. FAST-DS lets them fix this.

• The Foreign Assets of Small Taxpayers-Disclosure Scheme (FAST-DS) was notified on 15 August 2026.
• It opened on 16 August. Declarations can be made online until 31 December 2026.
• It was announced in the 2026-27 Budget.
• It is meant for students, young professionals, tech workers and Indians who have moved back from abroad.
• Hidden assets up to ₹1 crore pay 30% tax plus an equal extra amount. That is an effective 60%.
• Assets already taxed but left out of the return, up to ₹5 crore, need only a ₹1 lakh fee.
• Those who declare get immunity from prosecution under the Black Money Act, 2015.

(Source: The Hindu)

Quick Q&A

• When was the CBDT created? 1 January 1964.
• Which board did the CBDT come from? The Central Board of Revenue, set up in 1924.
• Which service do CBDT Members come from? The Indian Revenue Service (IRS).
• When did the Income-tax Act, 2025 come into force? 1 April 2026.
• What is the effective tax rate under FAST-DS for never-taxed assets? 60%.