The government has decided to drop some controversial and minor tax claims totalling Rs 3,500 crore, as mentioned by Revenue Secretary Sanjay Malhotra during the press conference after the interim Budget. These tax demands were linked to a total of 2.1 crore demand notices entailing amounts less than Rs 25,000.
In order to reduce tax litigations and disputes, which were stuck due to inadequate data or dispute, the finance minister proposed to waive off trivial outstanding 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 will be waived off.
The government clarified that 2.1 crore out of 2.68 crore tax demands were valued at less than Rs 25,000, some of which were in dispute since the enactment of the Income Tax Act. These demands were linked to not just income tax, but also wealth and gift tax.
But why were these specific years selected for the waiver of the trivial demand?
“Many of them are unreconciled due to systemic issues. We shifted tax records and centralised them in 2010-11, which is why the cut-off has been taken at 2010-11. The demands prior to that were decentralised, so we are unable to reconcile them,” said Malhotra.
Out of the low-value demands involving amounts less than Rs 10,000, about 58 lakh demand entries pertain to 2009-10 and 53 lakh belong to the five-year period up to 2014-15.
Finance Minister Sitharaman mentioned in the Budget speech that 1 crore taxpayers would benefit from the move, though the number of tax demands mentioned in the press conference stands at 2.68 crore involving Rs 35 lakh crore. Out of these, only 2.1 crore are being waived off. So, high value demands will continue to be under litigation and only trivial ones will be withdrawn.
However, additional clarity on the procedure to seek withdrawal would be needed. “There are no specific proposals in the Finance Bill 2024 in this respect and it is likely that a separate circular will be issued by the Central Board of Direct Taxes (CBDT) to provide the aforesaid relief,” says Suresh Surana, Founder, RSM India.
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