Tax resolution scheme to benefit over one crore

“In line with our government’s vision to improve ease of living and ease of doing business, I wish to make an announcement to improve tax-payer services. There are a large number of petty, non-verified, non-reconciled or disputed direct tax demands, many of them dating as far back as the year 1962, which continue to remain on the books, causing anxiety to honest tax-payers and hindering refunds of subsequent years,” Sitharaman said in her Budget speech.

“I propose to withdraw such outstanding direct tax demands up to twenty-five thousand rupees (Rs 25,000) pertaining to the period up to financial year 2009-10 and up to ten thousand rupees (Rs 10,000) for financial years 2010-11 to 2014-15. This is expected to benefit about a crore tax-payers,” she said.

The filing of Income-Tax Returns (ITRs) recorded a surge for the assessment year 2023-2024, with record 8.18 crore ITRs filed up to December 31, 2023 as against 7.51 crore ITRs filed up to December 31, 2022. This is a 9 per cent increase from the total ITRs filed for AY 2022-23.

Revenue Secretary Sanjay Malhotra in a post-Budget briefing said it should not be seen as a “waiver” but instead as a “withdrawal and correction of entries.” The government is now remitting 1.1 crore tax demands which will cost “less than Rs 3,500 crore”, he said, adding that about 58 lakh demand entries are for the period up to financial year 2009-10 and another 53 lakh entries pertain to the years from 2010-11 to 2014-15.

Overall, there are about 2.68 crore pending demands for Income Tax, wealth tax and gift tax from over the years worth Rs 35 lakh crore. Out of the 2.68 crore demands, about 2.1 crore demands are valued at less than Rs 25,000, Malhotra said.

“Many of these demands are very old, dating from 1962 when the Income-Tax Act was enacted and right now till very recently, till today…many of them are unreconciled because of systemic issues. We shifted all the tax records, centralised them in 2010-11. That’s why the cut-off has been taken at 2010-11 because previously the demands were decentralised. So we are unable to verify many of them, causing disruption and hindrance in payment of refunds,” he said.

The issue of a mismatch in records of tax demands and payments made by the tax-payers arose after the Income Tax department switched to a centralised system of records at the Centralised Processing Centre (CPC) at Bengaluru in 2010.

“This should not be seen as a waiver because in the year 2010-11, we shifted our records which were previously maintained at zonal levels or state levels and which were mostly paper records, or, if they were computerised, they were held locally. There was no central level record. In the year 2010-11, we shifted this centrally to our Centralised Processing Centre in Bengaluru. Many of the demands which are over there, have been paid for actually by the taxpayers. Because when we reach out to them and say this is a demand, it’s a small demand, they say we have already paid it. But the records are not with us because the records were decentralised. And so, mostly, these demands are actually not existing. They are existing on paper but they are not actual demands, they are mostly fictitious. And they are not going to yield any revenue. Some of them are very very small, Rs 1, 2 or less than Rs 10. It’s not a waiver…it’s just a withdrawal, it’s just a correction of entries,” Malhotra said.