CBDT circular Circular No. 04/2025 · 17 Mar 2025
Official title
circular no. 4/2025 frequently asked questions faqs on guidelines for compounding of offences under the income tax act 1961 dated 17.10.2024
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Check the official recordThe Central Board of Direct Taxes provides clarifications on the revised guidelines for compounding of offences under the Income-tax Act, 1961, issued on 17 October 2024. These guidelines apply to both pending and new applications. The revised framework removes offence categorization, eliminates limits on the number of applications, and allows compounding for offences under sections 275A and 276B. Applicants may file for compounding at any time after an offence occurs. Pending applications as of 17 October 2024 do not require fresh filings or new application fees. The competent authority for compounding is the jurisdictional Principal Chief Commissioner or Director General of Income Tax. The circular details procedures for co-accused, payment of compounding charges, and the impact of insolvency proceedings on compounding eligibility.
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F. o. 285/08/2014-lT (lnv. V)I .::l-':' / Government of India Ministry of Finance Department of Revenue (Central Board of Direct Taxes)
Circular No. 04/2025 Dated: March 17,2025
Sub: Frequently Asked Questions (FAQs) on Guidelines for Compounding of Offences under the Income-Tax Act, 1961 dated 17.10.2024
CBDT issued revised guidelines for Compounding of offences ('guidelines') under the Income-tax Act, 1961(the 'Act') on 17.10.2024. The revised guidelines superseded all existing guidelines on the subject and are applicable to pending as well as new applications, from the date of their issuance.
The revised guidelines have been simplified from previous guidelines, inter-alia, by eliminating categorization of offences, removing the limit on nunlber of occasions for filing applications, allowing fresh application upon curing of defects, which was not permissible wlder earlier guidelines, allowing compounding of offences under section 275A and 276B of the Act, removing the existing time limit for filing application viz 36 months from the date of filing of complaint, etc.
For better awareness and understanding among the stakeholders with respect to the revised guidelines dated 17.10.2024, clarifications are provided by issue of a Circular in the form of answers to the frequently asked questions (F AQs) as follows:
A. Compounding of offence
Q.l What is compounding of offence?
Ans: CompoWlding of an offence is a mechanism whereby the defaulter is reprieved of major legal consequences by affording him an opportunity to pay certain sum of money to escape prosecution. The specified offences can be compounded by the competent authority either before or after the initiation of proceedings.
Q.2 Whether compoWlding of an offence constitute as an admission of an offence by the applicant?
Ans: 0, compounding is intended to resolve the offence(s) and it is not to be construed as an admission of such offence(s) by the applicant. (Ref: panl 9.11 of the guidelines)
Q.3 Are there any offence(s) under Income Tax Act which are not compoundable?
Ans: No, all offence wlder Income Tax Act have been made compoWldable in revised guidelines dated 17.10.2024.
B. Competent authority/Jurisdiction
Q.4 Where can the compounding application be filed by the applicant?
Ans: The compounding application can be filed before the jurisdictional Pr. CCIT / CCIT / Pr. DGIT / DGIT, being the Competent Authority for compounding of offences. (Ref: para 8.1 of the guidelines)
Q.5 Who will be the competent authority where jurisdiction of the applicant lies with more than one jurisdiction charge for TDS related offences?
Ans: ill such case, the Pr. CCIT/ CCIT/ Pr. DGIT/ DGIT in whose jurisdiction compounding application has been filed will be the Competent Authority. However, in case the applicant files applications in more than one jurisdictional charge, the Competent Authority will be the jurisdictional authority where the quantum of TDS default is higher. (Ref: para 8.2 of the guidelines)
Q.6 Who will be the competent authority where the applicant has more than one TAN and jurisdiction over these TANs lies with more than one jurisdiction charge?
Ans: In such case, the jurisdictional authority where the quantum of TDS default is higher, shall be the Competent Authority. (Ref: para 8.3 of the guidelines)
C. Compounding application and fee
Q.7 Whether any format and fees has been prescribed for an application for compounding?
Ans: The application for compounding must be fi led in the format prescribed in Annexure-l to the revised guidelines. The application may include one or more offence(s) under different sections pertaining to one or multiple years/quarters. The application should be filed in the form of an affidavit on stamp paper of Rs. 100, along with application fees as per Para 4.2.1 of the revised guidelines dated 17.10.2024. (Ref: para 4.1.1 and 4.2.1 of the guidelines)
Q.8 Is there any time limit for filing of an application for compounding?
Ans: No, an application for compounding can be filed at any time after committing the offence, regardless of whether the same has come to the notice of the department or prosecution proceedings have been launched. (Ref: para 4.1.3 ofthe guidelines)
Q.9 Whether an applicant whose application was pending before issuance of revised guidelines required to deposit application fee as per para 4.2.1 ?
Ans: No application fees are payable for applications filed under earlier guidelines and pending on 17. 10.2024. (Ref: para 4.2.4 of the guidelines)
Q.IO Whether compounding application fee is adjustable against compounding charge payable?
Ans: Yes, compounding fee is adjustable but only against compounding charges payable for the offence(s) sought to be compounded in the particular application. Cross application adj ustment is not allowed. However, if compounding application is rejected for any reasons, the application fees shall neither be refundable nor adjustable against any subsequent application. (Ref: para 4.2.2 of the guidelines)
Q.ll Whether compounding is allowed if the application for such an offence was previously rejected? If so, whether separate applications need to be filed for more than one applications rejected under the previous guidelines? How will the compounding application fees be charged?
ADS: Yes, an applicant may apply for compounding of offence(s) through a single consolidated application, if one or more applications had been rejected under previous guidelines. However, the fresh application can only be filed if such rejection(s) were on account of curable defects (illustrative examples in para 3.2 of the revised guidelines) and no application is allowed to be filed for any of the rejection(s), made by the Competent Authority, on merits with those particulars i.e. offence and relevant financial year. Compounding application fees chargeable for a 'consolidated compounding application' would be charged in this case. (Ref: para 3.2 and 4.2.3 of the guidelines)
Q.12 Whether revised guidelines are applicable on pending compounding applications? rfyes, whether applicants have to file a fresh application?
Ans: Yes, revised guidelines are applicable on the applications, pending before issuance of these guidelines. The applicants whose applications were pending on 17.10.2024 are not required to file a fresh application or pay any fresh application fees. (Ref: para 3.1 and 4.2.4 of the guidelines)
Q.13 Whether applicant can withdraw a compounding application and file a new application?
Ans: The applicant can file a new single application or consolidated application after withdrawal of earlier application(s). However, such new application shall be treated as a subsequent application and higher rate shall be applicable as per Para 10. (Ref: para 10.2 of the guidelines)
Q.14 Whether applicant is required to file compounding application for all the offences together, for which prosecution proceedings has been initiated?
Ans: No, the applicant may apply for one or multiple offences in an application. His application cannot be rejected on the ground that he has not applied for particular offence for which notice for prosecution has been issued and proceedings are under progress. (Ref: para 4.1.2 and 4.1.3 of the guidelines)
Q.1S [s there any limitation as to the number of times compounding applications can be filed by a person?
Ans: No, there is no limitation on the number of times a person can file compounding application. However, the Competent Authority may reject an application filed by a person on the ground of him being a 'habitual offender' . (Ref: para 7.1 and 7.2 of the guidelines)
Q.16 Whether the applicant whose application was rejected in earlier guidelines on the ground of being convicted is eligible to re-apply for compounding as per revised guidelines?
