Will outstanding tax demand waiver help you get pending income tax refund?

income tax refund

Income tax refund: The Central Board of Direct Taxes (CBDT) issued a circular on February 13, 2024, to implement the interim budget announcement of waiving off direct outstanding tax demand of up to specified amounts for specified financial years.

Finance Minister Nirmala Sitharaman had announced the waiver of outstanding personal tax demand up to Rs 25,000 till FY 2014-15 in the
Interim Budget 2024. According to the announcement, all the outstanding personal tax demands up to Rs 25,000 till FY 2009-10 and up to Rs 10,000 for financial years 2010-11 to 2014-15 would be withdrawn by the government.

The circular issued on February 13, has clarified that extinguishment of outstanding tax demand from a taxpayer does not give him/her the right to claim tax refund of any amount under the Income Tax Act, Wealth Tax Act and Gift Tax Act. However, what if your income tax refund is stuck due to litigation?

Read Also: Small tax demands up to ₹1 lakh waived, relief for income tax payers

Usually, old outstanding tax demands are adjusted against the income tax refunds of the subsequent years. So, when you file an income tax return and there is a tax refund due, the income tax department would adjust that refund against the old outstanding tax demand.

An experts says that “If any refund has been already adjusted against these demands, then that refund will not be issued again. For example, you had a demand of Rs 15,000 for FY 2005-06 and you had a refund of Rs. 10,000 for FY 2021-22. The demand for FY 2005-06 would be adjusted against the refund of FY 2021-22. The balance demand amount will be waived off by the department and nothing can be done with the refund adjusted for FY 2021-22.”

Read Also: Unlocking Tax Savings: Comprehensive Guide to Income Tax Deductions in India

Before making any adjustment, the income tax department informs the taxpayer about it, and this information is displayed in the e-filing portal. The taxpayer has an option to agree or disagree with the adjustment of old tax demand. If the taxpayer disagrees with the outstanding tax demand, then the income tax refund is stuck till the final order is issued by the assessing officer.

Tax experts point out that in some instances (as illustrated above), an individual may be eligible for an income tax refund due to the extinguishment of old tax demands. Another expert says, This aspect has not been addressed by the CBDT’s order. It appears that if the income tax refund has been withheld but not offset with outstanding tax demands, the taxpayer should receive the refund if the tax demand is eligible for remission in accordance with CBDT’s order and there are no pending demands against the taxpayer for any other assessment year.

Read Also: Is Finance Ministry revising the new rule for payment to MSME within 45 days?

What to do if income tax refund is stuck?

If your income tax refund amount is stuck, tax experts advise that you email the income tax department. The department’s e-filing website has provided a phone number and an email address to raise queries. “In case of queries/concerns, please call 1800 309 0130 or write an email to [email protected] so that your concerns can be addressed,” says the income tax department on its e-filing website.

How to know if old tax demands have been extinguished?

A taxpayer might not know if there is any outstanding tax demand against his or her Permanent Account Number (PAN). An individual should login to their e-filing account to check if they have any outstanding tax demand. If the tax demand meets the eligibility criteria, then the same will be extinguished. However, the outstanding tax demands that do not meet the specified criteria are likely to be adjusted against future income tax refunds. All the outstanding tax demands (extinguished or pending) should be reflecting on the e-filing account.

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