Compounding of Offences CBDT circular

November 03, 2025

Central Board of Direct Taxes (CBDT) has issued updated guidelines wef 17th October 2024 on the compounding of offences under Section 279(2) of the Income Tax Act, 1961, superseding previous guidelines from 2008, 2014, 2019, and 2022

All offences under the income-tax law, including cases that involve agencies such as the Enforcement Directorate and the Central Bureau of Investigation, have been made compoundable by competent tax authorities if the applicant is not found to be involved in any anti-national or terrorist activity, the central board of direct taxes.

Compounding Process Overview

Mechanism allowing defaulters to avoid prosecution by paying a stipulated sum.
Helps taxpayers rectify defaults without facing severe legal penalties.

(CBDT) Revised Compounding Guidelines - Key Highlights

Aspect	Details
All Offences Compoundable	Includes offences involving agencies like ED or CBI, except for anti-national or terrorist cases.
Special Cases Require Approval	If anti-national or terrorist activity is involved, compounding needs CBDT chairman's approval.
Ease in Filing Applications	- Multiple applications allowed (upon curing defects). - No 36-month time limit anymore. - Applications accepted even after prosecution is launched.
Coverage Extended to More Sections	Now includes Sections 275A and 276B (tax evasion, TDS defaults).
Pending Cases Automatically Revised	No fresh submissions required for pending applications filed before October 17, 2024.
Flexible Fee Adjustments	Application fees can now be adjusted against compounding charges (specific offences only).
Withdraw & Reapply Option	Applicants may withdraw earlier submissions and reapply (may incur higher charges).

Competent Authorities for Applications

Position	Abbreviation
Principal Chief Commissioner	Pr. CCIT
Chief Commissioner	CCIT
Principal Director General	Pr. DGIT
Director General	DGIT

Impact on Taxpayers

Simplifies resolution of cases involving TDS defaults, tax evasion, or other offences.
Encourages voluntary compliance by easing processes and reducing litigation.
Improves the ease of doing business through accessible and flexible mechanisms.

Offences and Prosecutions before CBDT Amendment

Section	Nature of Default	Punishment	Fine
275A	Contravention of order made under section 132(1) (Second Proviso) or 132(3) in case of search and seizure	Upto 2 years	No limit
275B	Failure to afford necessary facility to authorised officer to inspect books of account or other documents as required under section 132(1)(iib)	Upto 2 years	No limit
276	Removal, concealment, transfer or delivery of property to avoid tax recovery	Upto 2 years	No limit
276A	Failure to comply with provisions of section 178(1) and (3)	6 months to 2 years
276B	Failure to pay to credit of Central Government (i) tax deducted at source under Chapter XVII-B (non-cognizable offence under section 279A), or proviso to section 194B, or failure to pay or ensure payment of tax as required by section 115O(2), first proviso to section 194R(1), proviso to section 194S(1) or section 194BA(2).	3 months to 7 years	No limit
276BB	Failure to pay the tax collected under the provisions of section 206C	3 months to 7 years	No limit
276C(1)	Wilful attempt to evade tax, penalty or interest or under-reporting of Income (non-cognizable offence under section 279A)—
	(a) where tax sought to be evaded exceeds Rs. 1 lakh (Rs. 25 lakh w.e.f. 1-7-2012)	6 months to 7 years	No limit
	(b) in other cases	3 months to 3 years (2 years w.e.f. 1-7-2012)	No limit
276C(2)	Wilful attempt to evade payment of any tax, penalty or interest (non-cognizable offence under section 279A)	3 months to 3 years (2 years w.e.f. 1-7-2012)	No limit
276CC	Wilful failure to furnish returns of fringe benefits under section 115WD/ 115WH or return of income under section 139(1) or under section 139(8A) or in response to notice under section 142(1)(i) or section 148 or section 153A (non-cognizable offence under section 279A)—
	(a) where tax sought to be evaded exceeds Rs. 1 lakh (Rs. 25 lakh w.e.f. 1-7-2012)	6 months to 7 years	No limit
	(b) in other cases Note : *** A person shall not be liable to be prosecuted under this section if he furnishes the return before expiry of assessment year or the tax payable by such person, not being a company, as reduced by the advance tax self-assessment tax paid before expiry of the assessment year, TDS and TCS, does not exceed Rs. 10,000.	3 months to 3 years (2 years w.e.f. 1-7-2012)	No limit
276CCC	Wilful failure to furnish in due time return of total income required to be furnished by notice u/s 158BC(a)	3 months to 3 years	No limit
276D	Wilful failure to produce accounts and documents under section 142(1) or to comply with a notice under section 142(2A)	Up to 1 year	Rs. 4 to Rs. 10 for every day of default
277	False statement in verification or delivery of false account, etc. (non-cognizable offence under section 279A)
	(a) where tax sought to be evaded exceeds Rs. 1 lakh (Rs. 25 lakh w.e.f. 1-7-2012)	6 months to 7 years	No limit
	(b) in other cases	3 months to 3 years (2 years w.e.f. 1-7-2012)	No limit
277A	Falsification of books of account or document, etc., to enable any other person to evade any tax, penalty or interest chargeable/leviable under the Act	3 months to 3 years (2 years w.e.f. 1-7-2012)
278	Abetment of false return, account, statement or declaration relating to any income or fringe benefits chargeable to tax (non-cognizable offence under section 279A)
	(a) where tax, penalty or interest sought to be evaded exceeds Rs. 1 lakh (Rs. 25 lakh w.e.f. 1-7-2012)	6 months to 7 years	No limit
	(b) in other cases	3 months to 3 years (2 years w.e.f. 1-7-2012)	No limit
278A	Second and subsequent offences under section 276B, 276BB, 276C(1), 276CC, 276DD, 276E, 277 or 278	6 months to 7 years	No limit
280(1)	Disclosure of particulars by public servants in contravention of section 138(2) [Prosecution to be instituted with previous sanction of Central Government under section 280(2)]	Up to 6 months (simple/rigorous)	No limit

Author:
Deepika Arya

Prepared On:
03/11/2025

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