CBDT Issues Revised Guidelines for Compounding Offences

The Central Board of Direct Taxes (CBDT) has issued revised guidelines for compounding offences under Section 279(2) of the Income-tax Act, 1961, simplifying and rationalizing the compounding procedure. Prior guidelines for compounding offences issued vide letter dated 16.05.2008, 23.12.2014, 14.06.2019 and 16.09.2022 are now superseded with the present guidelines from the date of issue, i.e. October 17, 2024, and would also apply to pending applications. However, if payment has been made or the prior amount was less, then there shall be no redetermination as per these guidelines.

The guidelines have been simplified by eliminating the categorization of offences, removing the limit on number of occasions for filing applications, allowing fresh application upon curing of defects, removing the existing time limit for filing applications, viz., 36 months from the date of filing of complaint, which had been extended from 24 months in the 2022 guidelines, etc.

For compounding of offences by companies and HUFs, the requirement of main accused filing the application has been dispensed with, along with removal of charge of separate compounding fee from the co-accused. Offenses can be compounded on payment of relevant compounding charges by the main accused or any of the co-accused.

The compounding charges have also been rationalized by abolishing interest chargeable on delayed payments and reducing rates for various offenses; multiple rates have been reduced to single rate and basis for calculation has also been simplified.