MUMBAI: What does the taxman do when the money market dries up and businesses struggle? It tries to figure out a way to inch towards a punishing tax target that the government has set by giving a little breathing space to companies and businesses — the prime taxpayers.
Mumbai, which accounts for the highest contribution to income tax in the country, is trying it out.

Amid tight liquidity and a tough business environment, tax commissioners in the financial capital decided on Monday to allow “deserving” assesses pay in instalments the amount they are required to fork out after challenging a tax demand order.

After receiving a demand order from the assessing officer of the Income Tax (I-T) department, a tax payer has to pay 20% of the demand within a month once the order is challenged before the Commissioner of Income Tax (Appeals), the first appellate authority. This amount can now be paid in multiple instalments till end March.

“However, this will be on a case to case basis and is not part of any rule. Instructions have gone out to commissioners in Mumbai to consider genuine requests from assesses so that don’t have to pay the entire 20% at one go. The payments can happen in three or five or six instalments, depending on the case,” a senior tax officer told ET.

The tax demands pertain to assessment year 2017-18 (or, the financial year 2016-17 when the Narendra Modi government demonetised all Rs 500 and 1000 rupee currency notes). A flurry of notices, raising tax demand, were issued by the I-T department before December 31, 2019 when assessments for FY 2016-17 time-barred. The department questioned the authenticity of deals that resulted in surge in cash deposits with banks following demonetisation of currency bills.