Representation to CBDT Seeks Immediate Notification to Reduce Disputed Demand Deposit from 20% to 10%
The Union Budget 2026-27 announced a significant taxpayer-friendly measure by reducing the standard amount required for obtaining a stay of disputed income-tax demand from 20% to 10%, to be computed on the core tax demand instead of the total demand including interest. However, despite the Budget announcement, the CBDT has not yet issued the necessary Office Memorandum or Circular modifying the existing Office Memorandum dated 31.07.2017. As a result, taxpayers continue to be required to deposit 20% of the disputed demand for obtaining a stay under section 220(6) of the Income-tax Act, 1961.
In this representation, CA Siddesh Gaddi has requested the Chairman, CBDT to immediately issue the necessary Office Memorandum implementing the Budget proposal. The representation also highlights several practical issues faced by taxpayers during recovery proceedings and suggests administrative measures to ensure effective implementation of the intended relief, including directions relating to stay orders, refund adjustments, recovery proceedings, speaking orders, and operationalisation of early hearing mechanisms.
Dated: 28 July 2026
To,
Shri Ravi Agrawal,
The Chairman
Central Board of Direct Taxes (CBDT)
Government of India
Respected Chairman,
Subject: Request for issuance of modified Office Memorandum to implement the proposal in the Union Budget 2026–27 dealing with reduction of the collection of disputed demand from 20% to 10%
1. With respect to the above subject, we respectfully submit this request on behalf of taxpayers and the tax professional fraternity regarding the immediate implementation of the proposal in the Union Budget 2026–27 regarding collection of disputed demand u/s 220(6) of the Income-tax Act, 1961, from 20% to 10%.
2. At the outset, we place on record our sincere appreciation for the progressive announcement made in the Union Budget 2026–27 to reduce the recovery of disputed demand from 20% to 10% when the appeal is pending before the first appellate authority. It has also been clarified that the said reduced percentage will be applied on the core demand instead of demand as per the notice issued under section 156 of the Act which includes interest.
3. However, despite the announcement, the said relief has not yet been operationalized through the issuance of the necessary Office Memorandum. Consequently, taxpayers continue to be required to deposit 20% of the disputed demand for obtaining a stay, as explained below.
4. Initially, CBDT Instruction No. 1914 dated 21.03.1996 laid down the guidelines governing stay of demand and recovery proceedings. The said instruction vested discretion in the Assessing Officer to grant stay of demand and did not prescribe any fixed percentage of the disputed demand to be deposited.
5. Subsequently, by Office Memorandum F. No. 404/72/93-ITCC dated 29.02.2016, the CBDT partially modified Instruction No. 1914 and standardised the recovery requirement by prescribing payment of 15% of the disputed demand for grant of stay where an appeal was pending before the first appellate authority.
6. Thereafter, by Office Memorandum F. No. 404/72/93-ITCC dated 31.07.2017, the CBDT enhanced the standard recovery percent from 15% to 20% of the disputed demand. The said Office Memorandum continues to govern the grant of stay by the concerned authorities.
7. In paragraph 113 of the Union Budget Speech 2026-27, the Hon’ble Finance Minister announced a reduction in the recovery requirement from 20% to 10%, to be computed only on the core tax demand. The announcement reflects the Government’s intent to provide substantial relief to taxpayers by reducing the financial burden associated with pursuing appellate remedies.
8. Despite the announcement made in the Union Budget 2026–27, the proposed relief has not yet been operationalized. To date, no Circular, or Office Memorandum has been issued by the CBDT modifying Office Memorandum F. No. 404/72/93-ITCC dated 31.07.2017 to reduce the recovery requirement from 20% to 10%.
9. The continued requirement of depositing 20% of the disputed demand for grant of stay causes considerable hardship to taxpayers pursuing bona fide appeals.
10. Consequently, the concerned authorities continue to insist upon payment of 20% of the disputed demand as a pre-condition for grant of stay. This imposes an unnecessary financial burden on taxpayers and defeats the very objective of the Budget announcement, which was intended to provide immediate relief by reducing the recovery requirement.
11. Other administrative actions that can be considered along with the above office memorandum:
- Direct the officers to pass a stay order on payment of 10% of the core demand. It has been observed that no stay orders have been passed on payment as per the office memorandum, which is leading to uncertainty and adjustment of refunds for the subsequent years. This is in addition to the constant threat of recovery of demand thereby defeating the purpose of the office memorandum, which intends to provide certainty.
- Direct the authorities not to issue a repeated reminder notice without considering the fact that the assessee would have discharged appropriate taxes as per the office memorandum.
- Direct the authorities not to adjust refunds beyond the prescribed percentage as above, which will defeat the purpose of the office memorandum.
- Direct the authorities not to immediately proceed with recovery measures on receipt of the order of the CIT (Appeals) disposing of the appeal against asssessee, especially when the statutory time limit is available to file a stay before the ITAT or the next appellate authority.
- Direct the authorities not to initiate recovery measures when a stay is pending before the CIT (Appeals) or such other higher authorities.
- To direct the authorities to pass speaking orders, dispose of the state application, especially when the taxpayer has made a prayer for complete stay of demand on a meritorious case
- To operationalize the scheme for early hearing, especially when the assessee is unable to meet the requirement of the assessing officer or the office memorandum.
- To make it mandatory and ensure implementation of prior notice before issuing recovery notices or issuing a notice of lien on the bank account.
12. In view of the above, we earnestly request your good office to kindly issue, at the earliest, the necessary Circular, Office Memorandum, or other appropriate legal instrument to give effect to the above. This would also ensure that the intended relief announced in the Union Budget is made available to taxpayers without further delay and would further the Government’s objective of a fair, transparent, and taxpayer-friendly tax administration.
We shall be grateful for your kind intervention and an early resolution in this regard.
Thanking you,
Yours faithfully,
CA Siddesh Gaddi
CC
Smt. Nirmala Sitharaman, Hon’ble Union Minister of Finance, Government of India)
