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Remission and Extinguishment of Tax Demand

While presenting the Interim Union Budget 2024-25, the finance minister had proposed to withdraw outstanding tax demands in certain cases with an intention to end petty, non-verified, non-reconciled or long-pending disputed direct tax demands.

In order to bring into effect, the said proposal, the CBDT has now issued an Order vide F. No. 375/02/2023-IT-Budget (“the Scheme”) dated February 13, 2024, to remit and extinguish certain tax demands, subject to satisfaction of certain conditions.

The overview of the Scheme is discussed hereunder:

1. Tax demands under which Statutes are covered:

Tax demands raised under following statutes are covered under the Scheme:

• Income-tax Act, 1961;
• Wealth Tax Act, 1957 and
• Gift Tax Act, 1958 

2. Tax demands outstanding as which date are covered under the Scheme:

Outstanding tax demands as on January 31, 2024 for the period up to AY 2015-16 would fall within the purview of the Scheme

3. Monetary limit for remission/extinguishment of the demand:

It is important to note that the remission/extinguishment shall be subject to maximum ceiling of Rs. 1 lakh qua a taxpayer. The following points are to be considered while applying the ceiling limit:  

•  Tax demand entries would comprise of principal component and interest, penalty, fee, cess, or surcharge;
•  Interest levied under relevant Acts on account of delay in payment of demand shall not be considered;
•  Remission and extinguishment of outstanding tax demands within individual monetary limits shall be carried out starting from the earliest assessment year to subsequent assessment years;
•  In order to compute the ceiling limits of Rs. 1 lakh, any demand entries exceeding individual monetary limits shall not be considered;
•  Fraction of any demand entry shall not be considered for computing the ceiling limit of Rs. 1 lakh. 

4. Our relevant points:

(a) The Scheme shall not be applicable on tax demands raised against tax deductors or tax collectors under TDS or TCS provisions of the IT Act.

(b) Tax waiver under the Scheme will not be regarded as income u/s 2(24)(xviii) of the IT Act.

(c) Remission or extinguishment of outstanding tax demands shall not confer any right to claim credit or grant immunity from criminal proceedings to the assessee.

(d) No requirement of audit for remission/extinguishment of outstanding demand.  

5. Illustration for ease of understanding:

Disclaimer:

This document is intended to provide certain general information and should not be construed as professional advice. It should neither be regarded as comprehensive nor sufficient for the purposes of decision making. The firm does not take any responsibility for accuracy of the document nor undertakes any legal liability for any of the contents in this document. Without prior permission of the firm, this document may not be quoted in whole or in part or otherwise.