Good News for Taxpayers! New Guidelines for Preventing Prosecution in Income Tax Offences

By: Admin | October 21, 2024
Category: TAX News
Read Time: 4 Minutes

The Income Tax Department has revised its guidelines for compounding offences under the Income Tax Act, 1961, offering relief to taxpayers who may have committed tax-related defaults. The process of compounding allows taxpayers to acknowledge their mistakes and seek resolution through the tax authority, often avoiding prosecution by paying a reduced fee.

Key Highlights of the Revised Guidelines:

The revised guidelines, issued by the Central Board of Direct Taxes (CBDT), streamline the compounding process, simplify existing regulations, and lower associated fees. They apply to both new and pending applications, and include several important updates:

1. Elimination of Offence Categorization:
   Offences are no longer classified, simplifying the compounding process.
2. No Limit on Filing Applications:
   Taxpayers can now submit applications multiple times, allowing corrections to previous defects.
3. Permitted for Specific Offences:
   Compounding is now allowed for offences under sections 275A and 276B.
4. Extended Filing Period:
   The previous 36-month limit for filing applications after a complaint has been removed.
5. Flexibility for Companies and HUFs:
   Any co-accused, not just the main accused, can now file compounding applications.
6. Lower Compounding Charges:
   The compounding charges have been rationalized, eliminating interest on late payments and applying a simplified rate of 1.5% per month for TDS defaults.

Scope of the Revised Guidelines:

The new guidelines, effective immediately, apply to both new applications and pending ones where compounding charges have not yet been fully paid. Key provisions include:

Resubmission for Correctable Issues:
Taxpayers whose earlier applications were rejected due to correctable errors, such as unpaid taxes or incorrect forms, can now resubmit.

No Refunds for Previously Paid Charges:
If higher compounding charges were paid under the previous guidelines, no refunds or adjustments will be made.

Not Applicable for Merit-Based Rejections:
Applications that were rejected on merit by the Competent Authority will not be reconsidered under the new guidelines.

Compounding Application Fees:

For applications submitted after the issuance of the revised guidelines, a non-refundable fee is required:

Single Application Fee: ₹25,000 per application.

Consolidated Application Fee: ₹50,000 per application.

This fee will be credited toward the total compounding charges, but only for applications filed after the new guidelines or rejected earlier due to correctable issues.

Conclusion:

These revisions reflect the Income Tax Department’s efforts to simplify tax compliance and offer taxpayers a more accessible route to resolve defaults without facing prosecution. By reducing fees and extending flexibility, the government aims to make tax compliance easier while maintaining accountability.

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