The revised Guidelines for Compounding of Offences under the Income-Tax Act, 1961 (hereinafter referred to as “the guidelines”) were issued on October 17, 2024. These guidelines supersede all existing guidelines on the subject and are applicable to all pending as well as new applications from the date of their issuance.

The guidelines have been simplified compared to the previous version, inter alia, by eliminating the categorization of offences, removing the limit on the number of occasions for filing applications, allowing fresh applications upon curing of defects, permitting the compounding of offences under sections 275A and 276B of the Act, and removing the existing time limit for filing applications, which was previously set at 36 months from the date of filing of the complaint.

Following the issuance of the guidelines, queries were received from stakeholders seeking clarifications on various provisions. Based on these queries, the CBDT has issued Circular No. 04/2025, dated March 17, 2025, in the form of answers to frequently asked questions (FAQs). These FAQs provide the necessary clarifications on the scope of the guidelines, eligibility for filing applications, the mode of filing compounding applications and payment of fees, terms for compounding, compounding charges and procedures for payment, time limits, and other related aspects.

The FAQs are available on the official website of the Income Tax Department at https://incometaxindia.gov.in/news/circular-no-04-2025.pdf

Compounding of tax offences clarified: FAQs detail eligibility, filing, fees and procedural rules under revised guidelines. Revised guidelines on compounding of offences under the Income Tax Act supersede prior guidance and apply to pending and new applications. They remove offence categorization, eliminate limits on application counts, permit fresh applications after curing defects, include additional offences within compounding scope, and remove the prior fixed filing time limit. CBDT Circular No. 04/2025 provides FAQ clarifications on scope, eligibility, filing modes, fee payment, compounding terms and charges, payment procedures and timelines, and is available on the Income Tax Department website.