Tax dept waives pending demands up to ₹1 lakh per taxpayer: Who benefits?

Following the directives outlined in the Budget 2024, the Central Board of Direct Taxes (CBDT) has issued an order for the remission and extinguishment of certain outstanding direct income tax demands. This move, detailed in the Finance Minister's interim Budget speech on February 1, 2024, aims to provide relief to taxpayers.

The CBDT's order, dated February 13, 2024, specifies the criteria for remission and extinguishment.

The relief covers outstanding tax demands under the Income-Tax Act, 1961, Wealth-tax Act, 1957, and Gift-tax Act, 1958, as of January 31, 2024.

The monetary limits for demands vary across assessment years until 2015-16, with an overarching cap of ₹1,00,000 per taxpayer, excluding tax deducted at source (TDS)/tax credited at source (TCS) demand entries.

The remission applies to demands from the assessment year 2010-11, with each demand entry up to ₹25,000, to the assessment year 2011-12 to the assessment year 2015-16, with each demand entry up to ₹10,000.

It means that for outstanding tax demands related to the assessment year 2010-11, each entry in the demand is eligible for relief up to a maximum of ₹25,000.

Similarly, for the assessment years 2011-12 to 2015-16, each entry in the demand qualifies for relief. The maximum relief for each entry, in this case, is capped at ₹10,000.

Crucially, this relief does not extend to demands against tax deductors or tax collectors under TDS or TCS provisions of the Income-tax Act, 1961.

The remission encompasses the principal component of tax demand and interest, penalty, fee, cess, or surcharge, adhering to various provisions of the specified acts.

In the event of any tax liability arising under specific sections of the Income-tax Act, 1961, such liabilities will also be remitted and extinguished.

The Directorate of Income-tax (Systems)/Centralized Processing Centre, Bengaluru (CPC), is tasked with implementing this order within two months. Any rectification of apparent mistakes in the implementation will be addressed by the CPC, Bengaluru.

Importantly, the remission and extinguishment do not confer any rights for claiming credit or refund by the taxpayer/assessee under the specified acts.

They also do not impact criminal proceedings pending/initiated against the taxpayer/assessee under any act or law.

It's noteworthy that the order eliminates the requirement for calculating interest on delayed payment of demand under specific sections of the Income-tax Act, Wealth-tax Act, and Gift-tax Act.

Moreover, this interest will not contribute to determining the ceiling of  ₹1,00,000.

Rule 19(1) of General Financial Rules, 2017, ensures that the remission and extinguishment do not necessitate an audit.