MUMBAI
:
Union finance minister Nirmala Sitharaman introduced several measures in the Budget for 2024-25 to ease taxpayer compliance. Key proposals include reducing the reassessment period for old income tax returns (ITRs), relief for residents holding foreign assets, and decriminalising delays in TDS payments.
Shorter reassessment periods
Sitharaman announced that ITRs can be reopened after three years only if unreported income exceeds ₹50 lakh. This would imply that for unreported income below ₹50 lakh, the tax department can reopen returns within the first three years of the assessment year in which the ITR was filed.
Besides, the reassessment window for unreported income over ₹50 lakh has now been capped at five years, down from the earlier 10 years. For search-related ITRs, the window has been capped at six years.
“If the AO (assessment officer) alleges that income exceeding ₹50 lakh has escaped assessment, he can issue notice under section 148 for up to five years from the end of the assessment year, provided he has in his possession books of accounts, or other documents, or evidence related to any asset or expenditure, or transaction or entries, which show that income chargeable to tax has escaped assessment,” said Sandeep Bhalla, partner, Dhruva Advisors Llp.
These changes aim to reduce tax uncertainty and disputes in reassessment cases, the FM noted.
For example, for ITRs filed for the 2024-25 assessment year, those with unreported income below ₹50 lakh can be reopened until 31 March 2028. For unreported income over ₹50 lakh, the reassessment period extends up to 31 March 2030.
These changes will reduce litigation and provide clearer timelines, easing business for taxpayers, Bhalla added.
Relief for residents with foreign assets
The budget also offered compliance relief to residents holding foreign assets.
Existing income tax laws mandated taxpayers to declare foreign assets under schedule FA (foreign assets) in the ITR form, and failure to do so attracted scrutiny under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, and a ₹10 lakh penalty.
The budget for 2024-25 proposed waiving the ₹10 lakh penalty where the aggregate value of the assets is below ₹20 lakh.
This proposal will benefit employees of multinational companies with employee stock ownership plans (Esops) and restricted stock units (RSUs) from the parent company headquartered overseas, investors in US stocks, and those with social security investments outside India.
However, all foreign assets, regardless of the value, must still be reported in the ITR. Note that the relaxation is only with respect to the penalty and non-disclosure of foreign assets below ₹20 lakh will still be scrutinised by the IT department. This amendment takes effect from 1 October 2024.
TDS prosecution relief
The finance minister also proposed to decriminalising delays in TDS payment until the filing of the statement. Currently, deductors must submit TDS by the due date, and file the statement by the end of the quarter.
“The due date to submit TDS with the government is typically the 7th of the following month. However, if it is deducted in March, the due date is 30 April (and not 7 April),” said Prakash Hegde, a chartered accountant and principal consultant of direct taxation at Acer Tax & Corporate Services LLP.
The Central Board of Direct Taxes (CBDT) penalises deductors if they fail to deposit the deducted TDS by the due date, often leading to prosecution under Section 279 of the I-T Act in some cases.
Effective 1 October, deductors will have until the end of the quarter to submit TDS without facing prosecution. This change will particularly benefit property buyers and tenants responsible for deducting and paying TDS on property sales and rent, reducing their compliance burden and risk of prosecution.
