Claiming Old Tax Refunds? Here’s How the New CBDT Rules Affect You

What is a Condonation of Delay Request?

A Condonation of Delay Request allows taxpayers to file or verify an ITR after the deadline has passed. This provision is critical in cases where the taxpayer faces genuine hardship, such as unforeseen circumstances or errors that prevent them from meeting the original deadlines.

Why is this Important?

1. Claim Old Refunds: If taxpayers discover they are entitled to a refund from a previous financial year (FY), they cannot claim it unless they file or revise their ITR.
2. Carry Forward and Set Off Losses: Taxpayers need to carry forward losses (e.g., capital losses, business losses) from earlier years to offset them against future income. If they fail to file their return on time, they lose this benefit unless a condonation request is accepted.

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Key Changes Introduced by the CBDT Circular

The Central Board of Direct Taxes (CBDT) issued a circular on October 1, 2024, bringing the following key changes:

1. Reduced Time Limit for Filing Condonation Requests

• Previous Rule: Taxpayers had 6 years from the end of the financial year for which the ITR was required to be filed to submit a condonation request.
• Revised Rule: The time limit has been reduced to 5 years.

Applicability:

• The new 5-year limit applies to condonation requests submitted on or after October 1, 2024.
• For requests filed on or before September 30, 2024, the older 6-year time limit remains applicable.

Implications:

Taxpayers now have one year less to apply for condonation of delay. This emphasizes the need for timely action to avoid losing the opportunity to claim refunds or carry forward losses.

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2. Exceptions to the New Time Limit

The reduced time limit does not apply in the following cases:

1. Refunds Arising Due to Court Orders:
   • If an income tax refund is based on a court order, the condonation request must be filed within 6 months from the end of the month in which the court order was issued.

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3. Mandate for Faster Processing

• The circular mandates that condonation requests should be resolved within six months from the end of the month in which they are filed.
• Earlier, there was no fixed timeline for processing such requests, and delays often extended beyond six months.

Authority for Decision:

The Commissioner of Income Tax, Central Processing Centre (CPC), Bengaluru, has been designated as the authority to decide on condonation requests related to:

• Filing time-barred ITRs.
• Verifying ITRs after the deadline.

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Eligibility for Filing a Condonation of Delay Request

Taxpayers can submit a condonation request only if:

1. There is a genuine hardship preventing them from filing or verifying the return on time.
2. The hardship can be substantiated with proper documentation and evidence.

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Step-by-Step Process to File a Condonation of Delay Request

Taxpayers can file a condonation request through the Income Tax Portal. Here’s how:

1. Log In

• Visit the Income Tax Portal and log in using your credentials (PAN, Aadhaar, or other login methods).

2. Access Condonation Request

• Navigate to the Services section.
• Select Condonation Request from the dropdown menu.

3. Choose Request Type

• On the Condonation Request page, choose the appropriate reason, such as:
  • Allow ITR Filing After Time-Barred
  • Verify ITR After Time-Barred

4. Fill Out the Application

• Provide the required details:
  • Request Category: Filing or Verification.
  • Assessment Year: The financial year for which the ITR relates.
  • Claim Value: Amount of refund or losses to be carried forward.
  • Reason for Delay: A detailed explanation with supporting evidence.
  • ITR Type: Choose the appropriate ITR form.
• Upload the supporting documents.

5. Submit and Verify

• Once the application is completed, submit it on the portal.
• Verify the request electronically using Aadhaar OTP, net banking, or other methods.

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Common Scenarios for Filing a Condonation Request

1. Missed Filing Deadline:
   • If both the belated return filing date and revised return deadline have passed, a condonation request allows the taxpayer to still claim refunds or carry forward losses.
2. Missed Verification Deadline:
   • If a taxpayer fails to verify their ITR within 30 days of filing, the return is invalid. They can file a condonation request to allow verification beyond the deadline.

Implications of the New Policy

Positive Aspects

1. Efficiency:
   • The six-month timeline aligns with the Income Tax Department’s focus on faster grievance resolution.
2. Streamlined Processes:
   • Delegation of authority to the CPC, Bengaluru, ensures consistency and centralized handling.

Challenges

1. Stricter Compliance:
   • The reduction in the time limit to five years increases the urgency for taxpayers to act quickly.
2. Genuine Hardship Cases:
   • Taxpayers with valid reasons for delays beyond five years may find it harder to secure condonation without legislative backing.

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Conclusion

The revised condonation rules by the CBDT reflect an effort to streamline tax processes and improve efficiency. However, the reduction in the time limit underscores the importance of timely compliance. Taxpayers must remain vigilant and proactive in meeting deadlines to avoid the complications of filing condonation requests. While the structured timeline for resolving such requests is a positive step, the policy’s success will depend on its implementation and responsiveness to genuine taxpayer grievances.