CBDT Issues FAQs on Compounding of Offences Under Income-Tax Act

Introduction

The Central Board of Direct Taxes (CBDT) has issued revised guidelines for compounding offences under the Income-Tax Act, 1961, effective 17th October 2024. These updates simplify the compounding process, offering greater flexibility to taxpayers while ensuring compliance.

Key Changes in the New Guidelines

1. No More Offence Categorization

   Earlier, offences were classified into categories for compounding. This distinction has been removed, making the process uniform.

2. No Limit on Applications

   Taxpayers can now submit multiple compounding applications without any restrictions.

3. Fresh Applications Allowed

   If an application was previously rejected due to defects, taxpayers can now reapply after curing those defects.

4. Inclusion of Sections 275A & 276B

   The revised guidelines extend compounding to offences under Section 275A (removal of sealed property) and Section 276B (failure to deposit TDS/TCS).

5. Elimination of the 36-Month Time Limit

   Earlier, applications had to be filed within 36 months of the offence. This restriction has been removed, offering more flexibility.

Implications for Taxpayers

Easier Compliance – Simplified rules encourage voluntary disclosure and compliance.

Faster Resolutions – Removing procedural restrictions helps in quicker case settlements.

More Transparency – The process ensures fairness and legal clarity.

Conclusion

The CBDT’s revised compounding guidelines aim to enhance tax compliance while offering relief to taxpayers. Businesses and individuals facing tax-related offences should review these changes and take advantage of the new provisions.