In a significant move aimed at easing the tax compliance process, the Ministry of Finance has unveiled new guidelines for handling delayed tax refund claims and applications for loss carry forward. Issued on Tuesday, these guidelines are expected to benefit taxpayers who may have missed filing their Income Tax Returns (ITRs) but are entitled to tax refunds.
The Central Board of Direct Taxes (CBDT), under the Ministry of Finance, emphasized that the current circular aims to address the applications for condonation of delay in filing returns claiming refunds, as well as returns claiming the carry forward of losses. This initiative introduces comprehensive guidelines outlining the conditions for condonation and the procedures to be followed in such cases.
“This enhancement in jurisdiction limits will significantly streamline the condonation of delay process for tax refunds, allowing taxpayers to receive their refunds faster and with reduced bureaucratic hurdles, especially for higher-value claims. It fosters trust and improves the ease of compliance for taxpayers,” stated Amit Bansal, Partner at Singhania & Co.
Key highlights of the new guidelines
1. Tiered Authority Structure:
The circular establishes a three-tier system for processing applications based on the claim amount:
- Claim Amount: Less than or Equal to Rs 1 Crore
Principal Commissioners of Income-tax/Commissioners of Income-tax (Pr. CsIT/CsIT) will have the authority to accept or reject applications for claims up to Rs 1 crore for an assessment year. - Claim Amount: Between Rs 1-3 Crore
Chief Commissioners of Income-tax (CCsIT) will be authorized to decide on applications where the claimed amount is above Rs 1 crore but does not exceed Rs 3 crore. - Claim Amount: Above Rs 3 Crore
Principal Chief Commissioners of Income-tax (Pr. CCsIT) will handle applications exceeding Rs 3 crore.
2. Time limits for filing applications:
A strict five-year deadline from the end of the assessment year has been imposed for filing condonation applications. This rule will apply to all applications submitted on or after October 1, 2024.
3. Processing time:
Tax authorities are mandated to dispose of applications within six months of receipt, expediting the refund process for taxpayers.
4. Court-related claims:
For refund claims arising from court orders, the duration of court proceedings will be excluded from the five-year limit. Applicants must file their claims within six months of the court order or the end of the financial year, whichever is later.
5. Supplementary claims:
Belated applications for supplementary claims of refund can be admitted for condonation if other specified conditions are met. The authority to accept or reject these claims will remain with the Pr.CCsIT/CCsIT/Pr.CsIT/CsIT, subject to additional criteria:
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- The taxpayer’s income is not assessable in the hands of any other individual as per the provisions of the Act.
- No interest will be granted on belated refund claims.
- The refund must result from excess tax deducted/collected at source, excess advance tax payments, or excess self-assessment tax payments as per the law.
6. No interest on belated claims:
The new circular specifies that taxpayers will not receive any interest on belated refund claims, which could impact how taxpayers strategize their tax filings and claims.
7. Verification extension:
The Commissioner of Income-tax at the Central Processing Centre (CPC), Bengaluru, is empowered to accept or reject petitions seeking condonation of delay in verifying the income tax return by sending the ITR-V to the CPC within the stipulated time limit.
The Finance Ministry’s new guidelines for managing delayed tax refund claims and loss carry forward applications signify a noteworthy step toward enhancing taxpayer experience and reducing bureaucratic complexities. By implementing a structured authority framework and strict timelines, the government aims to foster a more efficient tax compliance environment. These changes are expected to boost taxpayer confidence and promote timely submissions, ultimately leading to a more streamlined tax system. As the guidelines come into effect, taxpayers are encouraged to familiarize themselves with the new norms to ensure they can benefit from the enhanced processes.
