Around one crore small income tax payers to benefit as Finance Minister Nirmala Sitharaman announced withdrawing demand notices.

“In line with our Government’s vision to improve ease of living and ease of doing business, I wish to make an announcement to improve tax payer services. There are a large number of petty, non-verified, non-reconciled or disputed direct tax demands, many of them dating as far back as the year 1962, which continue to remain on the books, causing anxiety to honest tax payers and hindering refunds of subsequent years,” Sitharaman said while presenting the interim budget for FY 2024-25 on Thursday.

Accordingly, it has proposed withdrawing outstanding direct tax demands up to ₹25,000 until FY 2009-10. Similarly, outstanding direct tax demands up to ₹10,000 for financial years 2010-11 to 2014-15 withdrawn. “This will benefit one crore tax payers,” she said.

Later, while explaining the scheme, Revenue Secretary Sanjay Malhotra informed that nearly 58 lakh demands are below ₹25,000, while over 53 lakhs are below ₹10,000. These demands pertain to the period up to 2014-15. “Withdrawal of demands means revenue foregone of over ₹3,500 crore,“ he said. Furthermore, he added that there are over 2.68 crore disputed demands involving an amount of ₹35 lakh crore. Out of these, 2.1 crore have an amount of ₹25,000.

“Demand includes principal as well interest amount,” Malhotra clarified.

Commenting on the announcement, Tapati Ghose, Partner with Deloitte India, described it as cleansing the cobwebs in the tax systems. “Individuals are plagued with old demand claims that are non-verified, petty, non-reconciled or disputed. With no change in personal tax rates or slabs, individuals are comforted with certainty in taxation - at least for the interim,” she said.

Sanjay Sanghvi, Partner with Khaitan & Co, said the FM’s announcement to withdraw outstanding tax demands will provide relief to a large section of small and mid-level taxpayers.