In the case of some taxpayers, their income tax disputes have been going on for years. As a result, their tax refunds also get stuck due to the pending demand from the previous years. If you are also one of the taxpayers with an outstanding disputed tax demand, there is good news for you in Budget 2024.
The government will withdraw outstanding disputed tax demands
In her Interim Budget speech on 1st February 2024, Finance Minister Nirmala Sitharaman made a big announcement. She said the government will withdraw all outstanding disputed tax demands up to a specified amount and pertaining to a specified period. These include:
a) Withdrawal of outstanding direct tax demands up to Rs. 25,000 pertaining to the period up to Financial Year 2009-10 and
b) Withdrawal of outstanding direct tax demands up to Rs. 10,000 pertaining to financial years 2010-11 to 2014-15.
The disputed tax demands are being withdrawn to improve taxpayer services. The announcement is in line with the government’s vision to improve the ease of living and ease of doing business.
One crore taxpayers to benefit
The Finance Minister mentioned that there are a large number of petty, non-verified, non-reconciled or disputed direct tax demands. Many of these disputed demands date as far back as the year 1962. As these disputed demands continue to remain in the records of the Income Tax Department, they cause anxiety to honest taxpayers. They also hinder the processing of income tax refunds of subsequent years of these taxpayers due to the pending demand from the previous years.
The withdrawal of these outstanding direct tax demands is expected to benefit about one crore taxpayers. The withdrawal will also pave the way for the processing of income tax refunds of taxpayers with outstanding demand.
How much revenue will the government have to forgo?
Post the Interim Budget, in a press conference, the Revenue Secretary Sanjay Malhotra gave some details of the tax demands that are pending. There are around 2.68 crore pending demands, amounting to a total of Rs. 35 lakh crores.
From these 2.68 crore pending demands, about 2.1 crore are valued at less than Rs. 25,000. Many of these demands are very old, some dating back to 1962. Many of these are unreconciled due to systemic issues.
Out of the 2.1 crore tax demands, about 58 lakh demands are for the period pertaining up to 2009-10. Another 53 lakh demands are for the period from 2010-11 onwards. The total amount that the government will have to forgo with the withdrawal of outstanding disputed tax demands is Rs. 3,500 crores.
No changes in tax slabs and rates
The Finance Minister did not announce any changes to the income tax slabs and the tax rates as it was an Interim Budget before the union elections expected to be held in April-May 2024. Once the new government is in place, taxpayers can look forward to announcements related to tax deductions, slabs, rates, etc. While there are no taxation-related changes as of now, the withdrawal of outstanding disputed tax demands comes as a big respite to many taxpayers who have pending demands against them for many years. They can finally heave a big sigh of relief and say goodbye to years of dispute.
Gopal Gidwani is a freelance personal finance content writer with 15+ years of experience. He can be reached at LinkedIn.
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Published: 02 Feb 2024, 01:11 PM IST