Income Tax Department reduces time allowed to apply for old income tax refunds; check the new time limit

The Central Board of Direct Taxes (CBDT) recently issued a circular on the application for condonation of delay in filing ITR. Income taxpayers often file this application requesting the tax department to condone delay in filing/revising ITR in order to claim income tax refund and carry forward of losses and set off. This condonation of delay application allows them to file an income tax return (ITR) to claim past tax refund and/or claim carry-forward of loss and set-off in cases where the due date for filing tax return is long past.

The latest circular has reduced the time limit to apply for condonation of delay to five years from the end of the financial year in which the ITR was actually required to be filed. The earlier 2015 circular allowed taxpayers to file the condonation delay application within six years from the end of the financial year in which the ITR was required to be filed.

Hence, taxpayers will get one year less to file delay condonation requests to apply for old income tax refunds. CBDT issued the circular on October 1, 2024.

Sandeep Bhalla, Partner of Dhruva Advisors – a tax consulting firm, says, “The recent CBDT circular has the new five-year limitation for condonation requests. However, this new time limit will apply to condonation requests made on or after October 1, 2024. The time limit used to be 6 years, as per CBDT’s 2015 circular. If the condonation request is submitted on or before September 30, 2024, the old-time limit of 6 years will apply.”

Sudhir Kaushik, CEO of Taxspanner.com, says, “The new time limit of five years to submit the condonation delay request will not be applicable for the income tax refunds arising due to court order. However, the taxpayer must file a delay condonation application within six months from the end of the month in which the court order was issued.”

How do condonation of delay requests help in claiming old income tax refund?

A condonation of delay request is an application submitted by the taxpayer to be allowed to file an income tax return (well after the expiry of the last date for filing/revising that ITR) so that past/old income tax refunds can be claimed or losses for past years can be carried forward and set off.

To be allowed to claim an income tax refund by filing ITR for which the last date is long past, a taxpayer is required to file the condonation request. Typically, a condonation of delay request is required to file an ITR for a year for which the last dates to file belated and revised income tax returns are all over.

Kaushik says, “The income tax laws allow submission of condonation of delay request only in cases where a taxpayer is facing genuine hardships. While submitting a delay condonation request, a taxpayer is required to submit the proof and documents. If the income tax department believes that there is a genuine hardship and there is evidence of the same, then they accept the condonation of delay request. It is the prerogative of the income tax department to accept or reject the condonation delay request. It is the prerogative of the income tax department to accept or reject the condonation delay request.”

What is time limit to accept or reject condonation delay request

The circular has specified that the condonation of delay applications should be disposed of, as far as possible, within six months from the end of the month in which the application is received.

Bhalla says, “On a positive note, the directive mandates that applications be resolved within six months from the end of the month in which they are filed. This timeline promises faster processing, aligning with CBDT’s goal of timely grievance redressal and taxpayer satisfaction. However, the stringent five-year limitation may impact genuine cases where delays are unavoidable due to valid reasons. While the circular’s structured delegation is a step forward in efficiency, its lack of statutory backing for the time limit may raise compliance challenges and legal questions. This initiative balances efficiency with oversight, but further legislative clarity might be beneficial to safeguard taxpayer interests fully.”

Kaushik says, “Earlier, the income tax department was taking more than six months to dispose the condonation of delay request. The latest circular will help taxpayers to get the condonation in a timeline of 6 months now onwards.”

How to file condonation of delay request on income tax portal online

A taxpayer can file a condonation of delay request by logging in to his/her account on the income tax portal. Follow the steps below to file a condonation request:

Step 1: Once logged in, click on ‘Services’ and select ‘Condonation Request’

Step 2: On the condonation request page, select the reason for filing the condonation request (Allow ITR filing after time-barred) and click on ‘continue’

Step 3: A new webpage will open where you have to click ‘Create Condonation Request’. The income tax portal will ask you to provide certain details and upload documents. These are – Request Category, Assessment Year, ITR file, Claim Value, Filing Type, Reason for Delay & ITR Type from the options.
Enter the required details and click on ‘Submit’. Once submitted, you must also verify your ITR.

A condonation delay request is also often filed if the taxpayer has missed the deadline to verify their ITR. As per current income tax laws, if the ITR is not verified within 30 days from the filing date, then it is considered that the taxpayer has not filed the ITR. If the last date to verify the ITR has expired, then the taxpayer can file the condonation request to be allowed to verify the ITR after 30 days.

According to the circular, the Commissioner of Income-tax, Central Processing Centre (CPC), Bengaluru, shall be vested with the powers for acceptance/rejection of petitions seeking condonation of delay in verifying the ITR.

Source: The Economic Times