The Central Board of Direct Taxes (CBDT) has issued amended instructions for the compounding of specific Income Tax Act, 1961 offenses.

• The CBDT has issued amended guidelines for compounding certain offenses under the Income Tax Act of 1961.
• The CBDT has decriminalized offenses punished under Section 276 of the Act.
• Section 276 of the Income Tax Act provided for the harsh imprisonment of a taxpayer.

The Indian government has been attempting to make Income Tax guidelines more forgiving for taxpayers. Taxpayers make major contributions, assisting the government in driving the economy. The Central Board of Direct Taxes (CBDT) has Issued Amended Guidelines for the compounding of specific violations under the Income Tax Act of 1961, which will make doing business easier and lower the severity of penalties for violators. The new rules address a variety of offenses under the Act’s prosecution requirements.

One of the most significant modifications in the guidelines is that the CBDT has made compoundable offenses punished under Section 276 of the Act. If an Act becomes compoundable, a violation may avoid prison time by paying a fine. Previously, Section 276 of the Income Tax Act provided for harsh imprisonment for up to two years for a taxpayer.

The CBDT stated that the scope of eligibility for compounding of cases has been broadened, with the case of an applicant sentenced with imprisonment for less than two years, which was previously non-compoundable, now becoming compoundable.

The appropriate agency may commence prosecution procedures against taxpayers for infractions under the Income Tax Act. Taxpayers and experts have called for the offenses to be decriminalized.

“The time limit for accepting compounding petitions has been extended from 24 months to 36 months from the date of complaint filing. The difficulties of the procedures have also been reduced/simplified “said the CBDT

Read More: Gross Direct Tax Collections Increase by 30% in Fiscal Year (FY) 2022-23 Net Direct Tax Collections for the Fiscal Year 2022-23 have increased by 23%.

It further said that explicit upper limitations for the compounding fee covering defaults across many provisions of the Act had been introduced.

“Additional compounding charges in the form of penal interest at 2% per month up to 3 months and 3% per month after 3 months have been reduced to 1% and 2%, respectively,” the CBDT stated.

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