The Income Tax Department will cancel past tax claims of up to ₹1 lakh to consumers

A summary on cancel past tax claims worth up to ₹1 lakh


For taxpayers with outstanding direct tax demands up to a certain amount, there is good news. In an order dated February 13, 2024, the Central Board of Direct Taxes (CBDT) declared that the tax department has begun to remit and terminate qualifying old tax claims that were unpaid as of January 31, 2024.

“Consequent to the CBDT’s Order in F.No 375/02/2023-IT-Budget dated 13.2.2024, eligible outstanding direct tax requests have been repaid and eliminated. Please log into your account and navigate to Pending Action > Response to Outstanding Demand to verify the status of ‘Extinguished Demands’ in your case’, stated CBDT in an order dated February 13, 2024 and published on February 19, 2024.

What is the maximum amount of tax imposed on individuals?

According to CBDT’s order: The remission and extinguishment of tax demand shall be subject to a maximum ceiling of Rs 1,00,000 (Rupees one lakh) for any specific taxpayer/assessee for the following types of demand entries:

a) Tax demand under the Income-tax Act, 1961, or corresponding provisions of the Wealth-tax Act, 1957, or Gift-tax Act, 1958. 

b) Interest, penalty, fee, cess, or surcharge under Income-tax Act, 1961, or corresponding provisions of the Wealth-tax Act, 1957, or Gift-tax Act, 1958.

According to the order of the CBDT, “Consequent to the aforesaid remission and extinguishment of entries of outstanding demand, there shall not be requirement of calculation of interest on account of delay in payment of demand under sub-section (2) of section 220 of the Income-tax Act, 1961 or corresponding provision of Wealth-tax Act, 1957 and Gift-tax Act, 1958 and therefore the same shall not be considered for determining the ceiling of Rs 1,00,000.”

“It is clarified that interest shall not be calculated on account of delay in payment of demand under section 220(2). This is a big relief because interest under section 220 (2) is levied at a rate of 1% every month or part of the month, which has occasionally exceeded the principal tax amount over a period of time.”

In terms of previous demands, there have been varying levels for remission and extinguishment for various cut-off dates in the past. “As of January 31, 2024, all outstanding petty income tax claims of up to Rs 25,000 from the statute’s inception until FY 2009-10 and up to Rs 10,000 from FY 2010-11 to FY 2014-15 have been extinguished. The situation is clearly recorded on the income tax portal under the item ‘Response to Outstanding Demand’.” 

How will the maximum ceiling limit of tax demand be calculated?

CBDT said in the order:

The remission and extinguishment of outstanding tax demand entries will be carried out in respect of each demand entry falling within the specified monetary limit, beginning with the earliest assessment year and progressing to subsequent assessment year(s), subject to the condition that the aggregate value of such demand entries does not exceed Rs 1 lakh for any specific taxpayer. 

To calculate the maximum ceiling of Rs 1 lakh, any tax demand entry with a value greater than the given monetary limit would be excluded.

Under no circumstances will a fraction of any demand entry, whether its value falls within the stipulated monetary limit above or not, be considered for remission and extinguishment when calculating the maximum ceiling of Rs 1 lakh.

What Interim Budget 2024 says about outstanding tax demand ?

In the Interim Budget 2024, Finance Minister Nirmala Sitharaman stated: “Many small-scale, unverified, unreconciled, or disputed direct tax demands, some dating back to 1962, are still on file, creating anxiety for law-abiding taxpayers and impeding their ability to receive refunds for later years. About one crore taxpayers are anticipated to gain from this.

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