Interim Budget 2024: What Sitharaman said about withdrawing old tax demands, who will benefit

Budget 2024 Old Tax Demand: The government has proposed to withdraw old disputed direct tax demands of up to Rs 25,000 till FY10, and Rs 10,000 for 2010-11 to 2014-15. Here's what this means, and who it helps.

Budget 2024: Budget 2024: FM Nirmala Sitharaman with her team posed for photographs at the Finance Ministry before presenting the Budget in New Delhi on Thursday. (Express photo: Tashi Tobgyal)

By: Explained Desk

3 min readNew DelhiFeb 2, 2024 11:09 AM IST First published on: Feb 1, 2024 at 02:17 PM IST

Budget 2024 Outstanding Demand: If you are struggling with income tax refunds due to old tax disputes, the Interim Budget 2024 can offer you some relief.

The government has proposed to withdraw old disputed direct tax demands of up to Rs 25,000 till FY10, and Rs 10,000 for 2010-11 to 2014-15, Finance Minister Nirmala Sitharaman said Thursday. During her interim Budget 2024-25 speech, Sitharaman said the withdrawal of tax demand will benefit one crore taxpayers.

Also in Explained | Interim Budget 2024: Six key takeaways

What has Sitharaman announced?

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

Whom will this help?

The figure of one crore taxpayers Sitharaman mentioned would mean one in every eight tax filers.

This will essentially help those people who have been filing their taxes in recent years, but the income tax department has not issued them refunds because of pending older demands. With the government withdrawing these demands, the taxpayers can file returns and get whatever refunds are due to them.

In October 2023, Central Board of Direct Taxes (CBDT) Chairman Nitin Gupta had told The Indian Express that taxpayers were receiving tax demands dating back to 2010-11 at the time of issuance of refunds as the department had undergone a technology shift around 2011, from paper-based registers to computers. This had resulted in some previous tax demands showing up.

“We have started a unique demand management facilitation system about a year back for all such cases where refunds are held up due to a variety of reasons. An email is triggered to the taxpayer saying they will get a call three days from the dispatch of the email from a particular number and following this conversation, the issues are being resolved,” he had said, adding that the department had resolved 1.4 lakh such entries over the last year following this Mysuru-based call centre interaction, and the taxpayer could either accept the demand or contest it.

What part of the govt’s income comes from income tax?

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.

The interim Budget 2024 showed that most of the government financial resources come from borrowings. But the second biggest contributor — or the top income generator — is the revenues from income tax. The Budget documents suggest that income tax revenues will account for 19 per cent of all government resources in FY25. Corporate tax will account for 17 per cent, GST for 18 per cent and borrowings for 28 per cent.