Retroactive effect

Tax Glossary Definition

Retroactive effect

Retrospective tax relief refers to tax law provisions applied retroactively that benefit the taxpayer by reducing liability, granting refunds, or allowing deductions for prior periods. Such provisions correct inequities, administrative errors, or unintended consequences of earlier tax laws.

Example: If a government introduces a new exemption for small businesses and makes it effective from the previous financial year, businesses can claim refunds or reduced taxes for that earlier period — providing retrospective relief.

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