Income tax dues hit Rs 43 tn, CBDT to identify top 5,000 defaulters

Income tax arrears rose to Rs 43 trillion on April 1, 2024, from Rs 24 trillion year on year, and the Central Board of Direct Taxes (CBDT) has decided to create a team to draw up a list of the nation’s top 5,000 defaulters by September end.

Of the Rs 43 trillion, net collectible arrears are worth Rs 16.69 trillion after excluding the amount considered as “demand difficult to recover”. The CBDT aims to reduce this amount to Rs 7.98 trillion this year.

“This is a very steep rise, which requires immediate and urgent action,” the CBDT, which supervises direct taxation in India, said in its Central Action Plan (CAP) for the fiscal year 2024-’25, or FY25, on the year-on-year increase in income tax arrears. The CAP added that past tax demands could be managed by a “focused and targeted approach”.

While a significant part of the plan of action will be to identify the top 5,000 cases, it has been established that these cases include defaulters of personal income tax as well as corporate tax, and together account for around 60 per cent of all arrears. The main reasons attributed to pending arrears are mismatch in Tax Deduction at Source (TDS), taxpayers who cannot be traced, litigation issues and company liquidation.

For defaulters facing litigation among the top 5,000 cases, the CAP has suggested that CBDT officials must arrange for lawyers to collectively deal with such cases for a quick legal solution. For cases that are older than 10 years, the officials can seek the aid of the investigation wing or think of writing off arrears. For ex-parte orders, where the respondent is not in attendance, it must be established whether an appeal was filed. The CAP has guided officials to submit a detailed report in case a defaulter is untraceable and chalk out a fresh strategy.

The CBDT target for the addition of new income tax return filers in FY25 is 10 per cent of the tax filer base in FY24.