Contents (a) Legislations covered 6 (b) Monetary limit for waiver of demand 6 (c) No waiver for TDS/TCS demands 6 (d) Eligible tax demand and maximum ceiling 6 (e) Interest on account of delayed payment not to be considered 7 (f) No tax liability on waiver of outstanding tax demand 7 (g) Demand entry to be considered from the earliest assessment year 7 (h) No credit or refund or immunity from criminal proceedings 8 (i) Will the assessee get the refund withheld by the AO to offset the outstanding tax demands? 8 (j) Case study 9
In the Interim Budget 2024-25, the Finance Minister Smt. Nirmala Sitharaman has announced the withdrawal of outstanding direct tax demands pertaining to the period up to financial years 2014-15. Accordingly, the Central Board of Direct Taxes (CBDT) has issued an order F.no. 375/02/2023, dated 13-02-2024, to remit and extinguish the claims of revenue, giving effect to the budget announcement.
The order outlines the monetary limit for outstanding tax demands and the maximum ceiling limit eligible for a waiver for an assessee. The following are the key takeaways from the order:
(a) Legislations covered
The tax demand raised under the following Acts, which are outstanding as of 31st January 2024, shall be eligible for waiver:
Income-tax Act 1961
Wealth-tax Act, 1957
Gift Tax Act 1958
(b) Monetary limit for waiver of demand
Until the assessment year 2010-11, outstanding demand entries of up to Rs. 25,000 are eligible for the waiver, whereas from the assessment year 2011-12 to 2015-16, the waiver applies to demand entries of up to Rs. 10,000.
The ‘demand entry’ is not defined by the order. However, in general parlance, it can refer to an entry made by the Income Tax Department in its records indicating that there is an outstanding tax demand on a taxpayer. Such a demand can arise from various situations, such as discrepancies in the tax return, assessment/reassessment, rectification, etc.
(c) No waiver for TDS/TCS demands
The CBDT has specified that waiver of demand does not apply to the demands raised against the tax deductor or collector under the TDS or TCS provisions of the IT Act. Thus, such outstanding demands for the assessment years covered under this order will not be eligible for the waiver.
(d) Eligible tax demand and maximum ceiling
Eligible outstanding tax demand covers principal tax demands under the covered Acts, including interest, penalty, fee, cess, or surcharge levied under the provisions of such Acts. Further, the remission and extinguishment of eligible outstanding demand is subject to a maximum ceiling of Rs. 1,00,000 per assessee, regardless of the total eligible tax demand across all assessment years.
6 Analysis of CBDT’s order on withdrawal of outstanding tax demand
(e) Interest on account of delayed payment not to be considered
The order has clarified that interest computed under Section 220(2) on account of delay in payment of the demand shall not be considered while computing the ceiling limit of Rs. 25,000, Rs. 10,000, or Rs. 1,00,000, respectively. Consequently, upon remission or extinguishment of the outstanding demand, there shall not be the requirement of calculation of interest on account of delay in payment of demand.
(f) No tax liability on waiver of outstanding tax demand
Section 2(24) of the IT Act defines the meaning of ‘Income’. Sub-clause (xviii) to Section 24 provides that Government subsidies, grants, cash incentives, duty drawbacks, waivers, concessions, or reimbursements to the assessee are considered as income. It has been clarified that the tax waiver in accordance with the CBDT Order will not be classified as income for the taxpayer.
(g) Demand entry to be considered from the earliest assessment year
The remission and extinguishment of the entries of outstanding demand shall be carried out starting from the earliest assessment year to subsequent assessment years, subject to the ceiling limit of Rs. 1 lakh. The assessee is not given any option to choose any demand entry from any other assessment year.
Further, the assessee is not allowed to include a fraction of any demand entry for computing the ceiling limit of Rs. 1 lakh, even if the demand entry falls within the specified monetary limit. For example, let’s say an assessee has 5 demand entries:
Demand entry for AY 2004-05: Rs. 22,000
Demand entry for AY 2005-06: Rs. 24,000
Demand entry for AY 2006-07: Rs. 20,000
Demand entry for AY 2007-08: Rs. 18,000
Demand entry for AY 2008-09: Rs. 24,000
7 Analysis of CBDT’s order on withdrawal of outstanding tax demand
As per the order, demands from assessment years 2004-05 to 2007-08 totalling Rs. 84,000 will be considered for waiver. However, the assessee cannot use the waiver of Rs. 16,000 (Rs. 1,00,000 minus 84,000) from the demand of assessment year 2008-09 to get the benefit of the remaining ceiling limit of Rs. 1 Lakh, though the demand for AY 2008-09 is within the monetary limit of Rs. 25,000.
(h) No credit or refund or immunity from criminal proceedings
It is clarified that remission of outstanding demands does not grant the assessee the right to claim credit or refund under the IT Act or any other legislation. Further, waiver of demand would not impact ongoing or completed criminal proceedings against the assessee and does not provide any benefit, concession, or immunity under such proceedings.
(i) Will the assessee get the refund withheld by the AO to offset the outstanding tax demands?
This aspect has not been addressed by the CBDT’s order. It appears that if the refund has been withheld but not offset with outstanding tax demands, the assessee should receive the refund if the tax demand is eligible for remission in accordance with CBDT’s order and there are no pending demands against the taxpayer for any other assessment year. However, if the AO has passed an order to adjust the refund against outstanding tax demands, the assessee is not entitled to any refund, even if the outstanding tax demand falls within the monetary limits of the order.
8 Analysis of CBDT’s order on withdrawal of outstanding tax demand
(j) Case study
Compute the waiver of tax demand and outstanding tax liability, if any, with the following data:
Thus, the AYs eligible for waiver of outstanding tax demands would be follows
2006-07: Rs. 21,000
2007-08: Rs. 18,000
2009-10: Rs. 24,000
2010-11: Rs. 22,000
2012-13: Rs. 8,000
The total waiver amount for these demands is Rs. 93,000. The tax demand would remain outstanding for the assessment years 2008-09, 2011-12, 2014-15 and 2017-18.
Note 1. The remission is not allowed for the demand entry of assessment year 2008-09 because it exceeds the monetary limit of Rs. 25,000.
Note 2. The remission is not allowed for the demand entry of assessment year 2011-12 because it exceeds the monetary limit of Rs. 10,000.
Note 3. While the outstanding tax demand for assessment year 2014-15 falls within the monetary limit for demand entry, it cannot be considered for waiver because the inclusion of the Rs. 9,000 demand will surpasse the ceiling limit of Rs. 1 lakh.
Note 4. The outstanding tax demand of assessment year 2016-17 falls within the ceiling limit of Rs. 1 lakh but would not qualify because the assessment year falls outside the specified range of assessment years 2011-12 to 2015-16
9 Analysis of CBDT’s order on withdrawal of outstanding tax demand
AYs Principal tax amount Interest, penalty, etc. on tax amount Demand paid/ adjusted with refunds Interest under Sec. 220(2) Demand outstanding on Jan 31, 2024 Demand outstanding on Jan 31, 2024 (excluding Sec. 220(2) interest) Whether eligible for remission? Whether fall within ceiling limit? 2006-07 32,000 12,000 (23,000) 3,200 24,200 21,000 Yes Yes 2007-08 24,000 4,000 (10,000) 4,000 22,000 18,000 Yes Yes 2008-09 17,500 9,000 - 3,000 29,500 26,500 No No Note 1 2009-10 18,000 6,000 - 5,000 29,000 24,000 Yes Yes 2010-11 5,000 22,000 (5,000) 4,500 26,500 22,000 Yes Yes 2011-12 55,000 18,000 (55,000) 8,000 26,000 18,000 No No Note 2 2012-13 48,000 10,000 (50,000) 8,000 16,000 8,000 Yes Yes 2013-14 20,000 5,000 (25,000) - - - NA NA 2014-15 8,000 2,000 (1,000) 2,000 11,000 9,000 Yes No Note 3 2016-17 4,000 3,000 - 5,400 12,400 7,000 NA NA Note 4
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