The Central Board of Direct Taxes (CBDT) in India has announced that tax-related offences, including those under investigation by the Enforcement Directorate and the Central Bureau of Investigation, can now be settled by paying a fine.
This process is known as the compounding of offences.
This can be implemented solely if the taxpayer has no associations with anti-national or terrorist activities. Should a taxpayer be discovered to be involved in such activities, their matter can only be concluded with the consent of the CBDT chairman.
Compounding provides an individual the opportunity to avert severe legal penalties by paying a predetermined fine. The relevant tax authorities are authorised to resolve these offences either before or after legal actions commence.
The competent authority refers to the Principal Chief Commissioner, Chief Commissioner, Principal Director-General, or Director-General who holds jurisdiction over the assessee.
According to the CBDT FAQ, taxpayers can apply for compounding multiple times, and the 36-month application limit has been removed. Applications can now be made even after prosecution begins.
This measure seeks to offer relief to taxpayers and minimise legal conflicts.
Notable revisions in the updated tax regulations include simplifying the process for taxpayers to settle tax offences without facing legal action.
Currently, every offence under the Income Tax Act qualifies for compounding, with no restrictions on the number of applications and additional time provided to submit them.
