Withdrawal of income tax demand of up to Rs 1 lakh per person

MUMBAI: After establishing a cap of Rs 1 lakh per taxpayer, the government has started the process of eliminating previous unpaid minor income tax requests. Taxpayers who log on to the I-T portal may see the status of the requests.
The I-T department would waive modest outstanding direct tax claims of Rs 25,000 or less for the period up to FY10 and Rs 10,000 or less for the financial years 2010–11 up to 2014–15, as FM Nirmala Sitharaman said in her interim Budget address.

Sitharaman has claimed that around one crore taxpayers will gain from this. Government representatives estimated that the overall cost of waiving these claims would be around Rs 3,500 crore.

The CBDT recently issued an order stating that modest tax claims under the I-T Act, the former Wealth Tax Act, and the Gift Tax Act that were unpaid as of January 31, 2024, would be remitted and eliminated, up to a taxpayer’s limit of Rs 1 lakh. The CBDT emphasized that the Rs 1 lakh cap includes interest, penalties, fees, cessations, and surcharges under the three tax acts, as well as pending demand entries for the primary tax component in the tax authorities’ records.

Stated differently, the annual barrier of Rs 1 lakh per taxpayer would apply to the levels established for each year. It should be noted that even if the taxpayer has no other outstanding demands and the amount falls within the overall limit of Rs 1 lakh, it will not be taken into consideration if an outstanding for a given year exceeds the value prescribed for that year, say Rs 30,000 for FY11,” stated Ameet Patel, tax partner at Manohar Chowdhry & Associates.

The CBDT made it clear that the taxpayers in question are not entitled to any claims for credit or reimbursements when requests are terminated. Furthermore, the taxpayer will not be protected from any criminal action that is ongoing, being considered, or even started against them by such an extinguishment.
There’s a vagueness that has to be clarified. According to CBDT’s ruling, interest under section 220(2) of the I-T Act and the comparable provisions under the Wealth Tax and Gift Tax Acts would not need to be calculated as a result of the extinguishment of the outstanding demand. The late payment of the tax obligations is accompanied by this interest.

“Will the Rs 1 lakh aggregate limit, however, include interest that has already been assessed and is included in the demand that is still due in the tax authorities’ records? This has to be clarified,” Patel said.
It should be noted that claims made against persons obligated to deduct or collect tax at source under the I-T regulations pertaining to TDS or TCS will not be eliminated, even if they fall within the stipulated limitations.