Introduction
The Central Board of Direct Taxes (CBDT) has introduced frequently asked questions (FAQs) concerning the revised guidelines for compounding offences under the Income Tax Act, 1961, effective from October 17, 2024. These updates aim to simplify the compounding process by abolishing the categorization of offences, lifting application limits, and enabling new applications upon rectifying defects. Significant clarifications regarding the application format, fees, and jurisdiction for TDS-related offences are also included. Importantly, all offences under the Act are now subject to compounding, and pending applications under previous guidelines will seamlessly transition to the new framework, negating the need for resubmission.
Key Updates on Compounding Guidelines
On March 17, 2025, the CBDT released Circular No. 04/2025, which outlines answers to various FAQs concerning the revised guidelines for compounding offences under the Income Tax Act, 1961.
Simplification of Guidelines
The revised guidelines, established on October 17, 2024, supersede all prior documents and facilitate applications by:
- Eliminating categories of offences.
- Removing limits on the frequency of application submissions.
- Allowing new applications upon correcting defects.
- Permitting compounding for offences under Sections 275A and 276B, while eliminating the previous 36-month filing limitation.
Frequently Asked Questions
Here are the clarifications provided in the FAQ section:
A. Compounding of Offence
- Definition: Compounding is a procedure that allows the defaulter to avoid severe legal penalties by paying a specified amount. The competent authority may compound designated offences at any time.
- Admission of Guilt: Compounding does not imply an admission of guilt by the applicant.
- Scope of Offences: All offences under the Income Tax Act can now be compounded as per the new guidelines.
B. Competent Authority and Jurisdiction
- Filing Application: Applications must be filed with the jurisdictional Pr. CCIT / CCIT / Pr. DGIT / DGIT.
- Multiple Jurisdictions: If TDS-related offences fall under more than one jurisdiction, the application should be filed where the higher TDS default exists.
C. Application Format and Fees
- Submission Format: Applications must be submitted in the prescribed format (Annexure-1) and must include one or more offences for different periods/quarters. An affidavit on stamp paper of ₹100 and fees as per para 4.2.1 are required.
- Time Restrictions: There are no time constraints for submitting a compounding application.
D. Compounding Terms
- Withdrawal of Appeals: It is not necessary to withdraw appeals before applying for compounding, but an undertaking to withdraw appeals related to compounded offences is required.
- Consolidation of Applications: Applicants can submit a single consolidated application for offences previously rejected due to curable defects.
Conclusion
The revised guidelines significantly streamline the compounding process for offences under the Income Tax Act, providing clarity and ease of access for applicants. With all offences now compoundable and comprehensive FAQs clarifying various aspects of the guidelines, stakeholders are encouraged to utilize these updated provisions. For complete details and updates, please visit the official Income Tax Department website.