As a part of its agenda for the first 100 days, the central government may decriminalise minor income tax offences and replace prosecution with penalties.
Government to Ease Business Environment by Decriminalizing Minor Tax Offenses
One of the senior government official stated that the move was aimed at enhancing the ease of doing business.
If this decision is passed, then it would address a long standing demand from the industry to find a more business-friendly environment.
The threshold for compounding offences is being discussed by the government and shall be concluded after internal discussions are done.
Current stance of government is the prosecution income tax offences. However, now the same shall change and there shall be a shift towards compounding such offences to avoid prosecution and imposing the penalties instead for minor infractions.
At present, even for trivial offences like delayed payment of tax deducted at source (TDS) can result in directors of companies being prosecuted under various sections of the Act. This could potentially cause them an imprisonment ranging from three months to seven years.
Hence, it has been an industry wide demand, wherein it has been asked the same to be treated as civil liabilities and should incur penalties rather than criminal prosecution.
Industry Push for Decriminalization of Tax Laws Sees Progress After Budget Waivers
In previous stakeholder discussions, the industry sought the decriminalisation of 50-60 provisions in tax laws, including those related to direct tax, GST, and customs.
Notably, Finance Minister Nirmala Sitharaman in the 2024 Interim Budget announced a waiver of trivial outstanding direct tax demands.
This applied to direct tax demands of up to Rs 25,000 for the period up to 2009-10. The Centre also waived off outstanding disputes related to amounts up to Rs 10,000, betweent the financial years 2010-11 and 2014-15.
Now that the 2024 General Elections are concluded, Sitharaman is gearing up to announce her seventh Budget.
Boosting the overall ease of doing business in India, this step would be instrumental in building an environment of trust between taxpayers and authorities.
