Outstanding Tax Demands Up To Rs 1 lakh Waived; Wealth, Gift Tax Exempted; Know Full Details

Following Finance Minister Nirmala Sitharaman's interim budget announcement, the government has announced the waiver of small outstanding income tax demands, capped at Rs 1 lakh per taxpayer. Taxpayers can check the status of these demands online through the income tax portal, which will be completed within two months. “Eligible outstanding direct tax demands have been remitted and extinguished. Please log into your account and follow the path Pending Action > Response to Outstanding Demand to check the status of ‘Extinguished Demands’ in your case. In case of queries/concerns, please call 1800 309 0130 or write an email to taxdemand@cpc.incometax.gov.in so that your concerns can be addressed,” the IT Department announced yesterday on its official website.

Also Read: Old Tax Regime Slabs: Know Tax Rates And All Deductions

How Much Tax Will Be Waived Off?

The waiver applies to outstanding demands of Income Tax, Wealth Tax, or Gift Tax as of January 31, 2024, with the following thresholds set for eligibility.

Notably, every single demand below Rs. 25,000 for the period pertaining up to Financial Year 2009-10 and Rs. 10,000 for Financial Year 2010-11 will be waived, including interest, penalties, and cess on them. But the total of all these demands cannot exceed the Rs 1 lakh ceiling.

“The remission and extinguishment of the above outstanding tax demand shall be subject to the maximum ceiling of Rs. 1 lakh for any specific taxpayer/ assessee for the following types of demand entries. The principal component of tax demand under the Income-tax Act, 1961 or corresponding provisions of Wealth-tax Act, 1957 or Gift-tax Act, 1958; Interest, penalty, fee, cess or surcharge under various provisions of the Income-tax Act, 1961 or corresponding provisions, if any, of Wealth-tax Act, 1957 or Gift-tax Act, 1958,” I-T Department said.

Wealth Tax, Gift Tax Waived; No Waiver On TDS

Wealth tax is a 1 per cent tax on net wealth exceeding Rs 30 lakhs yearly usually valued on March 31 of every year, and applies to individuals, HUFs, and companies. Gift tax, repealed in 1958, taxed gifts over Rs 50,000 from non-relatives. Gifts from close family such as from your parents, spouse, siblings, or your in-laws are exempt, regardless of value, as per current regulations.

Most importantly, the above remission of outstanding direct tax demands shall not apply to the demands under TDS or TCS provisions of the Income-tax Act. 1961.

The waiver will be automatically applied by the Income Tax Department's Central Processing Cell (CPC) without requiring any action from the taxpayer, and the process is expected to be completed within two months.

Benefits for Taxpayers

This initiative offers the following benefits to taxpayers. It expedites I-T refund claims which were blocked by outstanding tax demands. Now after clearing pending tax demands, crores of taxpayers will get the refunds.

Automatic waiver of interest and penalties in the scheme provides huge monetary relief to taxpayers and gets rid of legal hassles. I-T Department clarified that there shall not be a requirement for calculation of interest on account of delay in payment of demand under section 220(2), the tax which for some taxpayers might have exceeded the principal tax amount over such a long period.