Direct Tax Arrears Surge to Over ₹43 Lakh Crore: Special Recovery Plan by Department

By: Admin
August 17, 2024
Categories: Income Tax News|News
4 Min Read

Income Tax Department Faces Surge in Arrears: Urgent Actions and Strategies Unveiled

The Income Tax Department is facing a major challenge due to a sharp rise in arrear demands. As of April 1, 2024, the total arrear demand has jumped to over ₹43 lakh crore, up from ₹24.51 lakh crore the previous year. This significant increase has led the department to launch a Central Action Plan to tackle the growing arrears.

The Magnitude of the Problem

The rise in arrears demands is a pressing issue for the Income Tax Department. The arrears have surged by more than ₹18.5 lakh crore in the past year. Consequently, the department is under intense pressure to develop effective strategies to address this problem. Notably, the top 5,000 cases alone account for nearly 60% of the total arrear demand, emphasizing the need for targeted action.

Central Action Plan: Key Components

To address the rising arrears, the Central Action Plan focuses on systematically reducing outstanding demands. Here are the key components of this plan:

Identification and Analysis

The Central Board of Direct Taxes (CBDT) has identified the top 5,000 cases with the highest arrears. A special team, under each Principal Chief Commissioner of Income Tax (Pr. CCIT), will conduct a detailed analysis of these cases by September 30, 2024. This analysis will categorize the demands and follow a 7-point action plan to address various types of demands efficiently.

Litigation Management

For demands currently under litigation with the Income Tax Appellate Tribunal (ITAT), High Courts, or the Supreme Court, the department will work with Standing Counsels to expedite resolutions. The strategy includes ‘bunching’ cases and scheduling hearings to address significant amounts locked in litigation.

Rectification and Appeals

The department will focus on cases needing rectification or appeal adjustments, particularly those from the last three years. Strategies will be employed to resolve these issues by the September 30 deadline, which includes transferring rights in these cases.

Long-Term Cases

Cases older than 10 years, where demands remain uncollected despite previous efforts, will be reassessed. The department may consider write-offs or more aggressive follow-up strategies, coordinating with banks and financial institutions.

Physical Records and Traceability

The department will review physical records related to the top 5,000 cases. Jurisdictional officers will provide detailed reports on cases where the assessee is untraceable. This will help develop separate strategies for these demands.

Revenue Collection Trends

Despite the arrears challenge, the Income Tax Department has reported a significant rise in direct tax collections. Between April 1 and August 11, 2024, direct tax collections increased by approximately 22%, reaching over ₹6.93 lakh crore. This net figure is after accounting for refunds.

  • Gross Collections: Increased to over ₹8.13 lakh crore from ₹6.55 lakh crore.
  • Refunds: Rose by more than 33% to over ₹1.20 lakh crore from ₹90,000 crore.

For the current fiscal year, estimates are promising:

  • Corporation Tax: Projected at ₹10.20 lakh crore, showing a growth of 10.5% over the Revised Estimates of FY 2023-24.
  • Personal Income Tax: Estimated at ₹11.87 lakh crore for FY 2024-25, reflecting a 16.1% increase over the Revised Estimates of FY 2023-24.

Future Outlook

The Income Tax Department’s comprehensive approach to managing arrears, combined with strong revenue collection figures, indicates a robust effort to stabilize and enhance tax administration. The Central Action Plan will play a critical role in addressing the arrears issue and ensuring effective tax revenue management.

By focusing on high-priority cases and improving litigation management, the department aims to effectively handle the surge in arrears and maintain a healthy revenue stream.

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