Budget proposes steps to reduce litigation, 'Vivad Se Vishwas' scheme 2.0 in offing

New Delhi: To reduce litigation, the Budget on Tuesday proposed to come out with 'Vivad Se Vishwas' scheme 2.0, cut down the time limit for initiation of re-assessment proceedings and hiked the threshold for filing of appeals by taxmen before legal fora. As per the Budget announcement, the I-T assessment can be reopened beyond three years from the end of the assessment year only if the escaped income is Rs 50 lakh or more, up to a maximum period of five years from the end of the assessment year. Even in search cases, a time limit of six years before the year of search, as against the existing time limit of 10 years, is proposed in the Budget. "This will reduce tax uncertainty and disputes," Finance Minister Nirmala Sitharaman said in her Budget 2024-25 speech.

Nangia Andersen LLP Executive Director Yogesh Kale said the reassessment regime under the Income Tax Act, 1961 was overhauled in 2021 by bringing in radical changes compared to the erstwhile reassessment regime. "This opened the floodgates of litigation at various levels up to the Supreme Court. One of the changes made was the ability of the tax officer to initiate reassessment up to 10 years if income suspected to have escaped is more than Rs 50 lakh," Kale said. The FY25 has proposed to amend the relevant provisions to provide that a tax officer cannot initiate reassessment beyond 5 years in any case. This amendment will help in substantially curbing the period of uncertainty for the taxpayers, he said. The Budget also proposed to increase the monetary limits for filing appeals related to direct taxes, excise and service tax in tax tribunals, high courts and the Supreme Court to Rs 60 lakh, Rs 2 crore and Rs 5 crore, respectively.

The current limit involves tax demand of Rs 50 lakh, 1 crore and Rs 2 crore, respectively. Besides, the government proposes to come out with Vivaad Se Vishwas scheme 2.0 for the resolution of certain income tax disputes pending appeal. In the first 'Vivad Se Vishwas' scheme announced in 2020, over 1.13 crore cases have been finally settled and payment of Rs 75,788 crore worth disputed tax has been received. Sitharaman in her Budget speech said that the government will continue its efforts to simplify taxes, improve taxpayer services, provide tax certainty and reduce litigation while enhancing revenues. The minister also said that 58 per cent of corporate tax came from the simplified tax regime in financial year 2022-23. Similarly, as per data available till now for the last fiscal, more than two-thirds have availed the new personal income tax regime. She also proposed a comprehensive review of the Income Tax Act, 1961 to make the act concise, lucid and easy to read and understand. "This will reduce disputes and litigation, thereby providing tax certainty to the tax payers. It will also bring down the demand embroiled in litigation. It is proposed to be completed in six months," Sitharaman said.