CBDT Releases Clarifications On Updated Compounding Guidelines Under Income Tax Act

The Central Board of Direct Taxes (CBDT) has released a new set of Frequently Asked Questions (FAQs) to clarify its revised guidelines for the compounding of offences under the Income Tax Act, 1961. Introduced on October 17, 2024, the updated guidelines aim to simplify the compounding process and provide taxpayers with easier access to relief from prosecution.

The revised framework eliminates the previous categorization of offenses, lifts the restriction on the number of times a compounding application can be submitted, and allows for the compounding of offenses under Sections 275A and 276B. Furthermore, the earlier 36-month time limit for filing a compounding application has been abolished.

Key clarifications include details on the format and fees for applications, jurisdictional authority for TDS-related offences, and provisions for withdrawing or reapplying after rejected or defective applications. Notably, all offences under the Income Tax Act are now compoundable, and applications pending under previous guidelines will automatically be covered under the revised framework, without the need for resubmission or additional fees.

The FAQs also address various scenarios, such as handling multiple jurisdictions and consolidated applications for previously rejected cases. Applicants are not required to withdraw appeals before filing, but must commit to withdrawing appeals related to compounded offences.

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