The Ministry of Finance has issued new guidelines for dealing with delayed tax refund requests and loss carry forward applications. The new instructions announced on Tuesday enhance the ceiling of tax refund claim amount in condonation of delay instances, which will benefit taxpayers who delayed completing any ITR despite having a tax refund owed to them.

"...the present circular is being issued to deal with the applications for condonation of delay in filing returns claiming refund and returns claiming carry forward of loss and set off thereof, containing comprehensive guidelines on the conditions for condonation and the procedures to be followed in deciding such matters," said the Central Board of Direct Taxes (CBDT) under the Ministry of.

"This change in jurisdiction restrictions will considerably streamline the condonation of delay procedure for tax returns, allowing taxpayers to get refunds faster and with fewer bureaucratic impediments, particularly for higher-value claims. It builds trust and simplifies compliance for taxpayers," stated Amit Bansal, Partner at Singhania & Co.

Tiered authority structure: The circular creates a three-tier system for processing applications based on claim amounts. Claim amount: less than or equivalent to Rs one crore. - The Principal Commissioners of Income-tax/Commissioners of Income-tax (Pr. CsIT/CsIT) shall have the authority to accept or reject petitions where the claimed amount is less than or equal to Rs 1 crore for an assessment year.

Claim amount: Between Rs 1 and 3 crore. The Chief Commissioners of Income-tax (CCsIT) would have the ability to accept or reject applications if the claimed amount is between Rs 1 crore and Rs 3 crore. Claim amount: More than Rs 3 crore. If the claimed sum exceeds Rs 3 crore, the Principal Chief Commissioners of Income Tax (Pr. CCsIT) shall have the ability to accept or reject the application. Time limit: Condonation applications must be filed within a five-year period beginning at the end of the assessment year. This rule is applicable to all applications filed on or after October 1, 2024.

Processing time: Authorities are required to dispose of applications within six months of receipt. Court-related claims: The five-year limit will not apply to refund claims stemming from court orders. Applications must be submitted within six months of the court order or the end of the fiscal year, whichever is later.

Extra claims: A belated application for extra refund (claim of additional amount of refund after completion of assessment for the same year) can be approved for condonation if the other conditions listed above are met. The powers of acceptance/rejection within the monetary limits given to the Pr.CCsIT/CCsIT/Pr.CsIT/CsIT in the case of returns claiming reimbursement and supplemental refund would be subject to the following additional criteria.

i. No other person has access to the assessee's income under any of the Act's provisions.

ii. No interest will be allowed on a refund claim made after the deadline.

iii. The refund is due to excess tax deducted/collected at the source, excess advance tax payment, and/or excess payment of self-assessment tax, as specified in the Act. The circular states that no interest will be allowed on overdue refund claims. 

Verification extension: It is also stated that the Commissioner of Income-tax, Central Processing Centre (CPC), Bengaluru, has the authority to accept or reject petitions under section 119(2)(b) of the Act seeking to excuse a delay in verifying the return of income by sending the ITR-V to the Centralised Processing Cell (CPC), Bengaluru within the time frame specified. The new guidelines are intended to streamline the process of managing delayed tax refund claims and loss carry forward applications, offering clarity to both taxpayers and tax authorities.