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CBDT drops small tax demands but not TCS, TDS claims
February, 20th 2024

Central Board of Direct Taxes (CBDT) on Monday ordered withdrawal of small tax demands that finance minister Nirmala Sitharaman had announced in her FY25 budget speech to improve ease of living.

CBDT said that tax demand up to 25,000 for assessment year up to 2010-11 and demands up to 10,000 from the next year up to assessment year 2015-16 will be extinguished.

However, any criminal action initiated or planned under any law will not be dropped. Any tax demand raised against taxes collected or deducted at source (TCS or TDS) will not be eligible for this relief, CBDT said. TCS and TDS leave a trail of transactions that the tax authority uses to keep an eye on transactions in the economy and to prevent any under-reporting of income.

Over the years, TDS and TCS have become an important mode of direct tax collection.

The maximum benefit per taxpayer will be withdrawal of demands totaling 1 lakh, the CBDT order said.

With the remission of the outstanding tax demand under the scheme, the provisions for levying interest for delayed tax payments under Section 220 (2) of the Income Tax Act will not apply and the same will not be considered in computing the upper limit of tax relief of 1 lakh per taxpayer.

CBDT also explained in the order that tax liability arising from a provision in the Income Tax Act that gives an inclusive definition of income including subsidy, grant or cash incentive or duty drawback will also be eligible for the relief of remission.

The tax authority clarified that the waiver or cancellation of the tax demand does not entitle taxpayers to any claims for credit or refunds.

“The waiver or cancellation will not influence any ongoing, planned, or potential criminal legal proceedings against the taxpayer and does not grant any immunity under any legislation," said Maneesh Bawa, partner at Nangia Andersen India, a business advisory firm.

Bawa said taxpayers are advised to access their online accounts and navigate to ‘Pending Action’ and ‘Response to Outstanding Demand’ to verify the status of extinguished demands related to them.

Sitharaman announced this scheme in her budget speech as part of efforts to improve ease of living and ease of doing business. The minister said the scheme was meant to withdraw a large number of “petty, non-verified, non-reconciled or disputed direct tax demands, many of them dating as far back as the year 1962, which continue to remain on the books, causing anxiety to honest tax payers and hindering refunds of subsequent years."

Sitharaman then said the scheme was expected to benefit about a crore tax-payers. 

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