In the interim budget for the financial year 2024-25, Finance Minister Smt. Nirmala Sitharaman declared the withdrawal of existing direct tax demands up to the financial year 2014-15. Following this announcement, the Central Board of Direct Taxes (CBDT) issued directive F.no. 375/02/2023 on February 13, 2024, to remit and extinguish claims, implementing the budget declaration.
(a) Applicable Legislation
Outstanding tax dues as of January 31, 2024, under the following statutes are eligible for withdrawal:
Income-tax Act, 1961
Wealth-tax Act, 1957
Gift Tax Act, 1958
(b) Monetary Limit for Waiver
Up to the assessment year 2010-11, outstanding demands of up to Rs. 25,000 qualify for waiver, while for the assessment years 2011-12 to 2015-16, the limit is Rs. 10,000.
(c) Exclusion of TDS/TCS Demands
Demands against tax deductor or tax collector under TDS or TCS provisions are not eligible for withdrawal.
(d) Scope and Limit of Tax Demand Waiver
The waiver covers the principal tax demand, including interest, penalties, fees, cess, or surcharges under the applicable acts, with a ceiling of Rs. 1,00,000 per taxpayer for all assessment years.
(e) Exclusion of Interest for Delayed Payment
Interest under Section 220(2) for delayed payment is not included in the calculation of the Rs. 25,000, Rs. 10,000, or Rs. 1,00,000 limits. Consequently, upon remission or extinguishment of the outstanding demand, there shall not be the requirement of calculation of interest on account of delay in payment of demand.
(f) Waiver Not Treated as Income
The waiver, as per the directive, will not be considered income for the taxpayer, aligning with Section 2(24) of the IT Act.
(g) Order of Consideration for Demand Entries
Waivers will be applied starting from the oldest assessment year to the newest, up to the Rs.1 lakh limit, without allowing taxpayers to select specific demand entries or partial amounts within the limit.
(h) No Rights to Refund or Immunity
The waiver does not entitle taxpayers to any credit, refund, or immunity from criminal proceedings.
(i) Refund Status
The directive does not clarify whether taxpayers will receive refunds withheld by Assessing Officers for offsetting against eligible tax demands. It suggests that refunds not yet offset may be issued if no other demands are pending, but adjusted refunds will not be returned.
This analysis outlines the CBDT's recent order to waive specific outstanding tax demands, highlighting the conditions, limits, and implications for taxpayers.
-CA Dhanush D Bolar, M.Com, ACA Partner
