Sanjay Malhotra Caps Old Tax Relief at Rs 1 Lakh

The interim budget of 2024 has proposed a relief for small taxpayers by withdrawing outstanding direct tax demands up to Rs 25,000 for the financial years till 2010 and up to Rs 10,000 for the financial years between 2010 and 2014. However, there is a catch: the relief to a single taxpayer will not exceed Rs 1 lakh, regardless of the number of demands.

The condition for relief

Sanjay Malhotra, the revenue secretary, clarified that this is the only condition for availing the relief. He said, “The details are being worked out. The only condition is the relief to a single taxpayer will not exceed ₹1 lakh. If an individual demand amount is limited to ₹25,000, the taxpayer can have more than one demand. But the total amount that will be withdrawn per individual will not exceed a lakh.”

He also added that this will apply to all cases, including search cases. He said that this measure will take about two months to be operationalised.

The benefit for taxpayers

The finance minister Nirmala Sitharaman said that this move will benefit one crore taxpayers, especially small businesses, who are plagued by old and disputed tax demands. She said, “There are a large number of petty, non-verified, non-reconciled or disputed direct tax demands, many of them dating as far back as the year 1962, which continue to remain on the books, causing anxiety to honest tax payers and hindering refunds of subsequent years.”

She also said that this is in line with the government’s vision to improve ease of living and ease of doing business and to improve taxpayer services.

The experts’ view

The experts welcomed this announcement as a step towards simplifying and rationalising the tax system and reducing litigation. Tapati Ghose, partner with Deloitte India, described it as “cleansing the cobwebs in the tax systems”. She said, “Individuals are plagued with old demand claims that are non-verified, petty, non-reconciled or disputed. With no change in personal tax rates or slabs, individuals are comforted with certainty in taxation – at least for the interim.”

Sanjay Sanghvi, partner with Khaitan & Co, said that this announcement will provide relief to a large section of small and mid-level taxpayers. He said, “This is a welcome move by the government to reduce litigation and provide certainty to taxpayers who have been facing harassment due to old and small tax demands.”