Excl: Govt likely to decriminalise minor I-T offences in Budget

The government has been moving towards reducing tax compliance

In a first, the Centre is likely to fulfil a long standing demand of the industry to decriminalise minor income tax offences to prevent prosecution and replace it with penalty, with the aim to boost ease of doing business, a senior government official said.

“The government will promote ease of doing business. The Centre is looking at decriminalising some provisions in the Income Tax Act. Threshold will be decided for minor offences for decriminalisation. For some minor offences, a penalty will be acceptable to end prosecution,” the official told Moneycontrol.

The provisions of tax laws have not been decriminalised so far. For income tax offences, the government’s long stand till now has been prosecution.
“There will be decriminalisation of some rules relating to income tax offences. Government is looking at compounding the offences so that there is no prosecution for minor offences, only penalty,” he said.

Internal discussions in the government are currently ongoing to decide a threshold for the compounding of offences, he added.

Right now, criminal prosecution in income tax law gets triggered even for trivial offences such as delayed payment of TDS for which even directors of a company can be prosecuted. One can be prosecuted under various Sections of the Act and be imprisoned for periods ranging from three months to seven years.

Delayed TDS payment creates a huge issue because even directors of a company are prosecuted. Industry had suggested replacing it with a penalty. Only in cases of more grave offences should criminal prosecution be there. The penalty should be a deterrent and TDS payment delays should be treated as a civil liability, according to an industry source.

Such a step by the government will build an environment of trust between the taxpayer and the authorities, he added.

During stakeholder discussions held earlier, industry had sought decriminalisation of 50-60 provisions in the tax laws, including direct tax, GST and customs.

The government has been moving towards reducing tax litigations by doing away with minor disputes. In this direction, the interim Budget earlier this year announced  waiver of trivial outstanding direct tax demands of up to Rs 25,000 for the period up to 2009-10. Additionally, outstanding disputes related to amounts up to Rs 10,000 for the years 2010-11 to 2014-15 were also waived off.