New Income Tax Rule Decriminalizes Punishable Offenses

Since the taxpayer is making significant contributions to the economy and helping the government drive the economy, the Government of India is working to tweak the income tax guidelines to make them more lenient for taxpayers.

The Central Board of Direct Taxes (CBDT) has recently released revised instructions for compounding specific offenses under the Income Tax Act, 1961, which will ease business operations and lessen the severity of penalties for offenders. The new rules address a variety of offenses covered by the Act's prosecution requirements.

The CBDT has decriminalized offenses punishable under Section 276 of the Act by making them compoundable, which is one of the major adjustments to the guidelines. If a law is made compoundable, anyone who violates it may do so while avoiding jail time by paying a fine. Previously, Section 276 of the Income Tax Act provided for the harsh imprisonment of a taxpayer for a duration of up to two years.

According to the CBDT, the criteria for cases that can be compounded have been widened; instances involving applicants who have been found guilty and sentenced to less than two years in jail are now eligible to be compounded.

The concerned agency may begin criminal prosecutions against taxpayers for infractions under the Income Tax Act. Decriminalizing offenses has been demanded by taxpayers and professionals. "From the day the complaint was filed, the prior limit of 24 months has been loosened to 36 months for the acceptance of compounding applications. Additionally, procedural complexity has been decreased or made simpler," said CBDT.

According to the statement, specified upper limitations have also been set for the compounding fee used to cover violations of various Act sections.

According to the CBDT, additional compounding fees in the form of penal interest that were previously calculated at 2% per month for the first three months and 3% per month for the following three months have been lowered to 1% and 2%, respectively.