The government has extended its one-time tax dispute resolution scheme by a month, giving companies including Vodafone and Cairn Energy time till January 31 to accept its offer to settle retrospective tax demands.

The Direct Tax Dispute Resolution Scheme, announced by finance minister Arun Jaitley in the budget for 2016-17, seeks to settle disputes arising out of retrospective change in income tax law dealing with indirect transfers as also end nearly 2.6 lakh pending tax cases where Rs 5.16 lakh crore are locked in.

The offer to settle the disputes was to end on December 31, but it has now been extended till January 31, Central Board of Direct Taxes (CBDT) said on Friday.

The scheme, opened on June 1, provides for waiving interest and penalties if the principal amount involved in retrospective tax cases is paid.

For disputes other than the retrospective tax cases, taxpayers whose appeal is pending as on February 29, 2016 before the CIT (Appeals) can settle cases by paying the disputed tax and interest up to the date of assessment.

For a disputed tax amount of up to Rs 10 lakh, the penalty will be forgone.

In cases where the disputed tax amount is above Rs 10 lakh, a penalty of 25% will be levied.

Through the scheme, the government had hoped to settle major retrospective tax cases facing Vodafone Group and Cairn Energy of UK. It also expected a third of the other tax disputes to be settled.

Its extension comes against the backdrop of tepid response from companies. So far, none of the companies facing retrospective tax cases have come forward.