The Central Board of Direct Taxes (CBDT) has rolled out revised guidelines for compounding offences under Section 279(2) of the Income-tax Act, 1961. These new guidelines aim to simplify and streamline the compounding procedure, replacing previous instructions issued in 2008, 2014, 2019, and 2022. Effective from October 17, 2024, the guidelines will also apply to pending applications, but there will be no re-evaluation of amounts already paid under the earlier framework if they were lesser.

Key Revisions in the Guidelines:

1. Elimination of Offence Categorization: The revised guidelines have removed the categorization of offences, simplifying the overall process.
2. No Limit on Number of Applications: Previously, there were restrictions on the number of times an individual or entity could apply for compounding. These limits have been abolished, allowing applicants to file as many times as needed upon curing defects.
3. Removal of Application Time Limit: The earlier guidelines required applications to be filed within 36 months from the date of filing the complaint (extended from 24 months in the 2022 guidelines). This restriction has now been removed, allowing more flexibility in filing applications.
4. Simplified Process for Companies and HUFs: The requirement for the main accused (such as the company director or key individual in a Hindu Undivided Family) to file the application has been waived. Now, any co-accused can pay the compounding charges, and the need for a separate fee for co-accused has been removed.
5. Rationalized Compounding Charges: The guidelines have rationalized compounding charges, reducing rates for various offences and simplifying the calculation. Interest charges on delayed payments have been abolished, and multiple rate slabs have been replaced with a single, uniform rate.

Impact on Taxpayers and Businesses:

• Easier Application Process: With the removal of restrictions on the number of applications and the time limit for filing, taxpayers will have more opportunities to resolve their tax disputes through compounding.
• Reduced Financial Burden: The simplified fee structure and removal of interest on delayed payments make the compounding process more financially accessible.
• Streamlined Process for Corporates: The waiver of the requirement for the main accused to file applications directly simplifies the process for companies and HUFs, allowing for quicker resolution of cases.

Conclusion:
The CBDT’s revised guidelines for compounding offences mark a significant shift towards simplifying tax dispute resolution. By eliminating restrictive timelines, reducing fees, and streamlining procedures for companies, these changes are expected to benefit taxpayers and encourage compliance with tax laws. This step also reflects the government’s continued focus on promoting a taxpayer-friendly environment.