The Central Board of Direct Taxes (CBDT) has relaxed legal consequences for delay in depositing tax deducted at source (TDS), under-reporting of income and non-filing of I-T returns, as per its latest circular issued on September 9, reported The Times of India.
When the non-payment of TDS is Rs 25 lakh or less with a delay of not more than 60 days from the due date, there will be no prosecution under normal circumstances. This might not apply for regular defaulters if a "collegium" comprising of two senior-ranking officers approves otherwise.
As per a tweet by Finance Minister Nirmala Sitharaman, minor procedural violations will not lead to severe consequences for honest taxpayers.
Previously, section 276B of the IT Act provided for prosecution for a minimum term of three months for the delay in TDS deposits of any amount after the due date. Bollywood producer Firoz Nadiadwala was one such case. He was sentenced to three months rigorous imprisonment for a delay in depositing TDS of Rs 8.56 lakh.
Ameet Patel, chairperson of the taxation committee at Bombay Chartered Accountants’ Society, said to the daily, "While CBDT’s circular dated May 28, 1980, had instructed I-T officials not to launch prosecution in cases where the delay in depositing TDS is less than one year, this instruction was withdrawn in August 2013. Now, a leeway of two months has been provided and it is a step in the right direction. Above all setting a threshold of above Rs 25 lakh for initiating prosecution proceedings will help several taxpayers, especially small-medium entrepreneurs."
In case of under-reporting or concealing income of up to Rs 25 lakh in returns, the case will be taken up for prosecution only after approval of the collegium. These offenses can call an imprisonment term of up to seven years. A similar rule is applicable for non-filing a return where tax liability doesn’t exceed Rs 25 lakh. The report pointed out that the act had provided a low threshold of Rs 10,000 for launching prosecution for non-filing of I-T returns.
The circular has come into effect immediately and will apply to previous cases where prosecution complaint is pending to be filed by the authorities. Also as a one-time measure, CBDT has relaxed the 12-month period for filing of a compounding application as a recourse in lieu of prosecution. All applications for this matter need to be filed with the compounding authorities before December-end.
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