Budget 2024: FM Calls Off Direct Tax Demand Under Rs 25,000

In a major relief to taxpayers, Finance Minister Nirmala Sitharaman announced that the government will withdraw all direct tax demands under Rs 25,000 in the Interim Budget 2024. This move is expected to benefit about one crore taxpayers and reduce litigation and compliance burden.

Why this matters

The Finance Minister said that this decision was taken to provide ease of doing business and ease of living to the citizens. She said that the government has been taking various steps to simplify the tax administration and reduce disputes. She cited the examples of the Vivad Se Vishwas scheme, which resolved over 1.5 lakh cases involving Rs 1.5 lakh crore, and the faceless assessment and appeal system, which eliminated human interface and potential harassment.

She said that the government has also rationalised the tax rates and exemptions in the past few years, resulting in more people filing tax returns and paying taxes. The number of taxpayers increased from 3.31 crore in 2013-14 to 8.48 crore in 2020-21, while the tax collection increased from Rs 6.38 lakh crore to Rs 9.45 lakh crore in the same period.

She said that the government will continue to take measures to widen the tax base and improve compliance. She said that the government will launch a new portal for e-filing of income tax returns, which will be more user-friendly and interactive. She also said that the government will implement the new Direct Tax Code, which will simplify and modernise the tax laws.

What this means for you

If you are a taxpayer who has received a direct tax demand notice of less than Rs 25,000, you can breathe a sigh of relief as the government will withdraw it soon. You will not have to pay any interest or penalty on it, nor will you have to file any appeal or representation. You will also save time and money that you would have otherwise spent on resolving the dispute.

However, if you have a direct tax demand of more than Rs 25,000, you will have to pay it as per the existing rules. You can also avail of the Vivad Se Vishwas scheme, which offers a waiver of interest and penalty if you pay the disputed tax by March 31, 2024.

The government’s decision to call off direct tax demand under Rs 25,000 is a welcome step that will reduce litigation and harassment for taxpayers. It will also help in clearing the backlog of pending cases and improving the efficiency of the tax department. It will also boost the confidence and trust of taxpayers in the tax system and encourage them to comply with their tax obligations.