New income tax rules come into effect from today, defaulters can't escape just by paying fine

Tightening the noose around tax defaulters, the new guidelines issued by the Central Board of Direct Taxes (CBDT) on Friday and come into effect from Monday (June 17) will make serious offences under black money and Benami Property laws "generally" non-compoundable.

Under the new rules, those evading taxes would no more be able to compound their offences just by paying a stiff penalty and they will now have to face the legal action. The new ITD guidelines will be applicable for all the cases tax evasion received on or after June 17.

Earlier, the CBDT guidelines allowed compounding of tax evasion offences related to undisclosed foreign bank accounts and overseas assets if the taxpayer paid penaly and the taxes with interest. However, the Anti-Black Money Act, 2015 didn't permit compounding in serious tax evasion cases under the law.

The Anti-Black Money Act, though, provided a limited window to people to come clean against payment of a flat 30 per cent tax and stiff penalties. However, the new guidelines disallowed compounding for both cases registered under the Anti-Black Money Act and offences related to undisclosed foreign bank accounts and overseas assets.

"Compounding shall also not be available where it is proved that a taxpayer enabled others to evade tax, such as through entities used to launder money. The bar also applies where a taxpayer generated bogus invoices of sales or purchase or provided accommodation entries. Offences under the Benami Transactions Prohibition Act, too, cannot be compounded," a leading English daily quoted Gautam Nayak, tax partner at CNK & Associates as saying.