Thursday, February 22, 2024

Understanding the 2024 Tax Waiver: A Simplified Guide

In February 2024, a new policy was announced by the Finance Minister, aimed at providing relief to taxpayers by waiving certain outstanding tax demands. This initiative is designed to reduce the financial burden on individuals and streamline the tax administration process. Here's a simplified breakdown of the policy, including a corrected example to help you understand how it might apply to taxpayers.

Key Points of the Tax Waiver Policy:

  1. Applicable Laws: The waiver is applicable to demands under the Income-tax Act, 1961, Wealth-tax Act, 1957, and Gift Tax Act, 1958.
  2. Monetary Limits for Waiver:
    • For assessment years up to 2010-11, demands up to Rs. 25,000 are eligible.
    • From 2011-12 to 2015-16, demands up to Rs. 10,000 are eligible.
  3. Exclusions: Demands related to TDS/TCS are not eligible for this waiver.
  4. Maximum Waiver Limit: There's a cap of Rs. 1,00,000 on the total amount that can be waived per taxpayer.
  5. Components Covered: The waiver covers principal tax amounts, interest, penalties, fees, cess, or surcharge.
  6. Non-Inclusion of Interest: Interest on delayed payment under Section 220(2) isn’t counted towards the ceiling limit.
  7. Tax Treatment of the Waiver: The waiver amount is not considered as income for the taxpayer.
  8. Prioritization of Waiver: Waivers are applied starting from the oldest outstanding demands.

Corrected Example: Simplified Tax Waiver Calculation

To illustrate how this policy works, let's consider a fictional taxpayer, Mr. A, and his outstanding tax demands over various assessment years. The table below breaks down his situation:

Assessment YearDemand Amount (Rs.)Eligible for Waiver?Action Taken
2005-0620,000YesWaived (Within limits)
2007-0818,000YesWaived (Within limits)
2008-0926,000NoNot waived (Exceeds limit)
2009-109,000YesWaived (Within limits)
2011-127,000YesWaived (Within limits)


  • Total Waived: Rs. 54,000 (20,000 from 2005-06, 18,000 from 2007-08, 9,000 from 2009-10, and 7,000 from 2011-12).
  • Remaining Demand: The demand from the 2008-09 assessment year remains unpaid as it exceeds the eligibility limit for waiver.

This example demonstrates how the waiver policy is applied, starting with the earliest eligible demands and considering the specific limits for each assessment year. It's important for taxpayers to review their outstanding demands against these criteria to understand their eligibility for waiver under this policy.

This policy represents a significant step towards resolving long-standing tax disputes and reducing the compliance burden on taxpayers.