CBDT Issues Revised Guidelines for Compounding of Offences

The Central Board of Direct Taxes (CBDT) on 17th October 2024? has issued a fresh set of guidelines for the compounding of offences under the Income Tax Act, 1961. The revised guidelines aim to streamline the process and introduce more clarity for taxpayers seeking to resolve offences related to income tax. These new instructions come into effect immediately.

Under the new guidelines, applicable to all fresh applications as well as pending ones, CBDT has introduced key changes that simplify the process of compounding, including revised fees and conditions for eligibility. Notably, taxpayers will now have to pay a non-refundable application fee of ?25,000 for a single offence and ?50,000 for consolidated applications covering multiple years or offences.

The guidelines also mandate that all outstanding tax liabilities, including interest and penalties, must be fully paid before filing a compounding application. In cases where additional dues are identified by the department, taxpayers will be given a 30-day window to settle the amount.

Significantly, the CBDT has clarified that compounding of offences is not an automatic right of taxpayers. Applications can be rejected in cases of habitual offenders or for severe infractions, with reasons recorded in writing. Furthermore, offences involving anti-national activities, terrorism, or money laundering will require special approval from the Chairman of the CBDT.

To address concerns from Non-Resident Indians (NRIs) and others, the guidelines emphasize that opting for compounding does not equate to an admission of guilt. This is expected to alleviate fears regarding the legal implications of compounding for individuals and entities.

The CBDT has also introduced provisions for the revival of previously rejected applications if they were denied due to curable defects, such as incorrect filings or non-payment of dues. In such cases, taxpayers can reapply without incurring additional fees, provided the defects are corrected within one month of notification.

The new compounding framework is part of the government's ongoing efforts to simplify tax administration and encourage voluntary compliance among taxpayers.

??Check out the official Guidelines for compounding of offences under the Income Tax Act given by the Ministry of Finance: https://bit.ly/3C6b2iP

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