To promote ease of doing business and decriminalise minor offences, the income tax department has revised guidelines to allow compounding of those offences that attracted conviction with imprisonment for less than two years.
The discretion available with the competent authority has also been suitably restricted, the central board of direct taxes (CBDT) said.
“Some of the major changes made for the benefit of taxpayers include making offence punishable under Section 276 of the Income Tax Act as compoundable,” it said. As per section 276, a taxpayer could be punished with rigorous imprisonment for up to two years and also be liable for a fine. The Section applies to cases involving removal, concealment, transfer or delivery of property to thwart tax recovery. These were non-compoundable offences so far.
The time limit for acceptance of compounding applications has also been relaxed from the earlier limit of 24 months to 36 months now, from the date of filing of the complaint. Procedural complexities have also been reduced or simplified, the CBDT said.
Specific upper limits have been introduced for the compounding fee covering defaults across several provisions of the Act. Additional compounding charges like penal interest at the rate of 2% per month up to 3 months and 3% per month beyond 3 months have been reduced to 1% and 2% respectively, it added.