In a major relief to taxpayers, Finance Minister Nirmala Sitharaman on Thursday withdrew outstanding tax demand notices up to the financial year 2014-15 for amounts less than ₹10,000.

The move is expected to benefit about 1 crore taxpayers.

"There are a large number of petty, non-verified, non-reconciled or disputed direct tax demands many of them dating back as far back as 1962, causing anxiety to honest taxpayers and hindering refunds," the finance minister says while reading her Budget speech.

"In line with our vision to improve ease of living and ease of doing business, I propose to withdraw such outstanding direct tax demands up to ₹25,000 pertaining to the period up to financial year 2009-10 and up to ₹10,000 for financial years 2010-11 to 2014-15," the minister says.

Over the last ten years, India's direct tax collections have more than trebled and the return filers swelled to 2.4 times. The average processing time of returns has been reduced from 93 days in the year 2013-14 to a mere 10 days this year, thereby making refunds faster.

The finance minister's announcement to withdraw old outstanding tax demands of up to ₹25,000, which are still appearing in the government's books as 'outstanding tax demand also provide relief to a large section of small and mid-level taxpayers, says Sanjay Sanghvi, partner, Khaitan & Co.

"I would like to assure the taxpayers that their contributions have been used wisely for the development of the country and welfare of its people," Sitharaman says.

The government had earlier rationalised tax rates. Under the new tax scheme, there is now no tax liability for taxpayers with income up to ₹ 7 lakh, up from ₹ 2.2 lakh in the financial year 2013-14.

The threshold for presumptive taxation for retail businesses was increased from ₹2 crore to ₹3 crore. Similarly, the threshold for professionals eligible for presumptive taxation was increased from ₹50 lakh to ₹75 Lakh. Also, corporate tax rate was decreased from 30% to 22% for existing domestic companies and to 15% for certain new manufacturing companies.

"In the last five years, our focus has been to improve tax-payer services. The age-old jurisdiction-based assessment system was transformed with the introduction of Faceless Assessment and Appeal, thereby imparting greater efficiency, transparency and accountability. Introduction of updated income tax returns, a new Form 26AS and prefilling of tax returns have made filing of tax returns simpler and easier," the finance minister says.

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