Indian Government Decided to Withdraw Old Income Tax Disputes

In her Interim Budget 2024-25 speech, the India Finance Minister Nirmala Sitharaman spells relief to almost one crore taxpayers by withdrawing the disputed tax demands across the country. The government will eliminate the pending minor tax demands up to a specific amount and specific period of time. There will be a clear order issued giving information on the prescribed procedure, as Central Board of Direct Taxes (CBDT) Chairman Nitin Gupta shared the information.

So, if someone is struggling with income tax refunds due to an old tax dispute, the government has proposed to eradicate outstanding direct tax demand of up to Rs 25,000 pertaining to the financial year 2009-10, and Rs 10,000 pertaining to years 2010-11 to 2014-15. This significant move will provide relief to small taxpayers. , Finance Minister Nirmala Sitharaman made this big announcement to remove the “anxiety of honest taxpayers”

This latest development marks a bold step by the government to streamline tax administration and release the burden on honest taxpayers tangling with pending tax demands.  This will improve the taxpayer services and improve the lives of the small taxpayers.

There are numerous numbers of insignificant, non-verified, irreconcilable, and disputed demands, most of them are since 1962 which continues to remain paper based registered, creating troubles for the honest taxpayers and resisting their refunds of succeeding years, Sitharaman said in statement.

Ahead of this policy, if someone would give direct income tax with a salary of Rs60,000, then 10% TDS, for instance Rs5000 is given to the government as an advance tax by the company.  Due to that process, the government collects advance tax and then refunds the rest above the actual tax of that person. But, if someone had a dispute tax demand of 20,000 back in 2008, the government used the policy of not issuing the refund tax amount as compensation for the previous tax demand. This no-return fund because of pending older demands creates a dispute among the government and the direct taxpayers as they were not in favor of this reduction.

Now, with the announcement of the government withdrawing the old tax dispute cases of Rs. 25,000 up to 2009-10, and Rs. 10,000 up to 2010-11 to 2014-15, one crore taxpayers will get relief which means everyone in eight tax filers.

While the government will have to forgo Rs 3,500 crores. There are around 2.68 pending tax demands, of which about 2.1 crore are valued at less than Rs 25,000. But most of these demands are extremely old, some dating back to 1962. Many of these are unreconciled due to old systemic issues. Out of 2.1 crore tax demands, 5.8 lakh demands are pertaining to the financial year 2009-10 and the rest 53 lakh demands are from 2010-11 to 2014-15. So, with the withdrawal of outstanding disputed tax demands, the government will forgo the revenue of Rs. 3,500 cores. Almost one crore taxpayers will benefit from it. However, the income tax department had already resolved over 1.4 lakh cases last year, according to Nitin Gupta. But with this new policy, taxpayers will be able to expect easy, untroubled, and more transparent tax services. This initiative not only eradicates the administrative burden on taxpayers but will help the economy’s recovery and growth.

Here the question arises, why such old cases are still showing? The reason behind this is the technological shift after 2011. Before that, paper-based register records were there. So, the government decided to resolve these cases, Nitin Gupta shared the information on October 2023. And, now the government has decided to withdraw these cases from a specific amount to a specific time.

On the other hand, the government has made no taxation-related changes, except the withdrawal of old disputed tax demands. Nitin Gupta said that we will eliminate these disputed demands from the records of the income tax department.

The taxpayers will not have to do anything, the department will not contact them in any way. The process will be non-adversarial with assuring that their interests will be safeguarded nevertheless.

The CBDT chief said we will eliminate these tax demands, we will remove such demands from the records of the tax department. The taxpayers will not have to do any work and the department will not contact them either.

After budget announcement, Nitin Gupta called the process not be unfavorable for the taxpayer. But these demands will have to put on the e-filling portal of taxpayers individually, so that they can also observe and if can detect any problem, the department resolve it right away. The income tax department will take care of all the issues after the withdrawal of disputed cases. If any issue like rectification in relation to the disputed tax demands or pending refund cases, the department will take charge of everything and clear it.  The government aims to take a reliable and transparent system with proper guidelines for the taxpayers.

With this initiative, the country's economy will thrive and reduce the burden on taxpayers and will help to ease their living and improve their business which afterwards help the economy to develop. It signals a proactive approach towards magnifying accountability and efficiency in India’s tax administration framework and makes the taxpayers trust the income tax department which in return will strengthen the administrative systems that will end up boosting the economy.

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