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New income tax rules with tougher penalty comes into effect
June, 24th 2019

Under the revised guidelines of the Income Tax department, those indulging in serious offences under black money and benami laws will not be able to get away just by paying a penalty. The Central Board of Direct Taxes (CBDT), the apex direct tax policy making body, has issued a revised 32-page guideline for compounding of offences under direct tax laws, 2019.

The new tougher tax laws came into effect from this Monday.

Here are 10 things to know about the new income tax rules:

1) Compounding of income tax offences is not a matter of right. In income tax language, non-compounding means that the I-T department can file a prosecution case against the tax evader in the court in lieu of payment of due taxes and surcharges under section 279(2) of the Income Tax Act.

2) Earlier, taxpayers were able to settle cases of tax evasion earlier by just paying the tax demand, penalty and interest.

3) The Income Tax department may allow compounding keeping in mind factors such as conduct of the offender, the nature and magnitude of the offence in the context of the facts and circumstances of each case.

4) Offences under serious criminal cases of money laundering, terror financing, corruption, possession of benami properties and undisclosed foreign assets will be "generally" non-compoundable, according to the revised CBDT guidelines.

5) The fresh guidelines also mentions offences related to anti-national or terrorist activity or those being investigated by the Enforcement Directorate (for offences under the Prevention of Money Laundering Act, CBI (IPC and Prevention of Corruption Act), Lokpal, Lokayukta or any other central or state agency like the local police will also be non-compoundable "generally".

6) The CBDT has listed 13 cases where the offences are not to be generally compounded.

7) The Union Finance Minister will be sole authority to relax these guidelines in a "deserving case" after obtaining a report from the Central Board of Direct Taxes (CBDT).

8) Cases in which the person seeking compounding of an offence under the I-T Act was convicted by a court for two years or more will fall under the no compounding category.

9) Offences under Sections 275A, 275B and 276 of the Act will not be compounded.

10) said the new guidelines, the new guideline that supersedes the one issued in 2014, are aimed to streamline the action against serious cases of black money and criminal tax evasion.

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