The Government of India has been working to tweak Income Tax guidelines to make them more lenient for taxpayers. It’s the taxpayers who make significant contributions, thus helping the government drive the economy. Now in a move that will pave the way for ease of doing business and reduce the severity of punishment for violators, the Central Board of Direct Taxes (CBDT) has come out with revised guidelines for compounding of some offences under the Income Tax Act, 1961. The new guidelines cover various offences under the prosecution provisions of the Act.
One of the key changes in the guidelines is that the CBDT has decriminalised offences punishable under Section 276 of the Act by making them compoundable. If an Act becomes compoundable, in that case, a violator may avoid prison term by paying a penalty. Earlier, Section 276 of the Income Tax Act had a provision for punishing a taxpayer with rigorous imprisonment for a term of up to two years.
The CBDT said that the scope of eligibility for compounding of cases has been relaxed whereby the case of an applicant who has been convicted with imprisonment for less than 2 years being previously non-compoundable, has now been made compoundable.
As per the Income Tax Act, the concerned agency can initiate prosecution proceedings against taxpayers for violations. Taxpayers and experts have been demanding to decriminalise the offences.
“The time limit for acceptance of compounding applications has been relaxed from the earlier limit of 24 months to 36 months now, from the date of filing of complaint. Procedural complexities have also been reduced/simplified,” said the CBDT.
It said that specific upper limits have also been introduced for the compounding fee covering defaults across several provisions of the Act.
“Additional compounding charges in the nature of penal interest @2% per month up to 3 months and 3% per month beyond 3 months have been reduced to 1% and 2% respectively,” said the CBDT.