Budget 2025 proposes to rationalise Time Limit to Impose Penalties

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The Union Budget 2025 proposes a significant change to the Income-tax Act by rationalizing the time limits for imposing penalties. Currently, Section 275 of the Act contains a complex web of timelines, varying depending on the stage of appeals and the specific circumstances of each case. This complexity makes it challenging for both taxpayers and tax authorities to track and manage deadlines effectively.

To address this, the Budget proposes a uniform six-month time limit for imposing penalties. The amended Section 275 will stipulate that no penalty order can be passed after six months from the end of the quarter in which the connected proceedings are completed, the order of appeal or revision is received, or the penalty notice is issued, whichever is later. This streamlined approach aims to simplify tax administration and improve the efficiency of the penalty imposition process.

This change, effective from April 1, 2025, will consolidate the various existing timelines into one clear and consistent framework. 7The Budget also proposes related amendments to other sections of the Income-tax Act, including Section 246A, to ensure consistency and clarity regarding appealable orders related to penalties. These changes are intended to reduce ambiguity, improve transparency, and make the tax system more user-friendly.

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