Tax relief: Ceiling of Rs 1 lakh established for withdrawal of small tax demands
The Income Tax department has set a limit of Rs 1 lakh per taxpayer for withdrawing small tax demands. This decision comes after the announcement made in the interim budget about withdrawing direct tax demands.
The Income Tax department, through an official order, has specified the conditions for withdrawing the demands, focusing on demands up to the assessment year 2015-16.
Finance Minister Nirmala Sitharaman, in the interim budget for 2024-25, had previously stated that tax demands for the assessment year 2010-11, up to Rs 25,000, and for the assessment years 2011-12 to 2015-16, up to Rs 10,000, would be withdrawn. This move is expected to help taxpayers and ease financial burdens.
The tax department’s order states that outstanding demands related to income tax, wealth tax, and gift tax as of January 31, 2024, will be cancelled.
However, this is subject to a maximum limit of Rs 1 lakh for any individual taxpayer or assessee. This limit includes the principal tax amount, as well as interest, penalty, fee, cess, and surcharge.
This cancellation does not apply to demands raised against tax deductors or collectors under the Tax Deducted at Source (TDS) or Tax Collected at Source (TCS) provisions of the Income-tax Act.
In the recent order, the Central Board of Direct Taxation (CBDT) clarified that the Rs 1 lakh limit covers outstanding demand entries in the tax authorities’ books, including the principal tax amount, interest, penalty, fee, cess, or surcharge under the three tax acts.
However, the cancellation of demands does not entitle taxpayers to claim credits or refunds. Additionally, this action does not provide immunity from any ongoing, initiated, or anticipated criminal proceedings against the taxpayer.
The CBDT mentioned that demands within the specified limits, even if eligible for withdrawal, will not be cancelled if raised against entities required to deduct or collect tax at source under the Income-tax provisions related to TDS or TCS.