F. No. 142/8/2016-TPL
Government of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes
(TPL Division)

Dated 30th of June, 2016

Clarifications on the Income Declaration Scheme, 2016

The Income Declaration Scheme, 2016 (hereinafter referred to as ‘the Scheme’) incorporated as Chapter IX of the Finance Act, 2016 provides an opportunity to persons who have not paid full taxes in the past to come forward and declare the undisclosed income and pay tax, surcharge and penalty totalling in all 45% of such undisclosed income declared. The Income Declaration Scheme Rules, 2016 (hereinafter referred to as ‘the IDS Rules’) have been notified. In this regard, Circular No. 17 of 2016 dated 20th May, 2016 and Circular No. 24 of 2016 dated 27th June, 2016 issued by the Board provided clarifications to 14 and 11 queries respectively. Subsequently, further queries have been received from the public about various provisions of the Scheme. The Board has considered the same and the following clarifications are issued.-

Question No.1: Will the information contained in the declaration be shared with other law enforcement agencies?

Answer: No, the information contained in the declaration shall not be shared with any other law enforcement agency. The information will also not be shared within the Income Tax Department for any investigation in respect of a valid declaration.

Question No.2: Whether immunity will be provided under other economic laws including Service Tax, VAT, Companies Act, SEBI Act & regulations etc.?

Answer: The Scheme provides immunity under the Income-tax Act, 1961, the Wealth-tax Act, 1957 and the Benami Transactions (Prohibition) Act, 1988. Immunity from Benami Transactions (Prohibition) Act is subject to the condition that the property will be transferred to the declarant (being the person who provided the consideration for the property) latest by 30th September, 2017. However, as mentioned in response to Question No.1 above, the information contained in the declaration made under the Scheme will not be shared with any other tax or law enforcement agency.

Question No.3: Where the value of immovable property determined under Rule 3 of the IDS Rules is lower than the value adopted or assessed/assessable by stamp valuation authority referred in section 50C or section 43CA of the Income-tax Act, whether value of such property is to be declared as per Rule 3 of the IDS Rules, or as per section 50C/43CA?

Answer: The value of the property for the purposes of declaration in such cases shall be computed as per Rule 3 of the IDS Rules even if such value is lower that the value adopted or assessed/assessable by stamp valuation authority.

Question No.4: Whether credit for tax deducted, if any, in respect of income declared shall be allowed?

Answer: Yes; credit for tax deducted shall be allowed only in those cases where the related income is declared under the Scheme and the credit for the tax has not already been claimed in the return of income file for any assessment year.

Question No.5: Where a valid declaration is made after making valuation as per the provisions of the Scheme read with IDS Rules and tax, surcharge & penalty as specified in the Scheme have been paid, whether the department will make any enquiry in respect of sources of income, payment of tax, surcharge and penalty?

Answer: No.

Question No.6: What is the purpose of obtaining the information about the nature of undisclosed income in the last column of table at point (I) relating to nature of undisclosed income in Annexure to Form-1?

Answer: The purpose of obtaining information about the nature of undisclosed income is to know whether the undisclosed income is in the form of movable asset, immovable asset, gold, jewellery or cash. Here, the nature of income need not be confused with the source of income.

There is no need to indicate the source of income at all. In the column meant for nature of undisclosed income one has to write the nomenclature such as ‘immovable property’, ‘movable property’, ‘gold’, ‘jewellery’ or ‘cash’ etc. This will enable the taxpayer to establish the link between the income declared under the scheme and the claim, if any, made in respect of such undisclosed income in the return of income filed subsequently or during any assessment proceedings.

Question No.7: In case the value of immovable property is evidenced by registered deed, whether the value as per registered deed or the market value as on 01.06.2016 is to be declared?

Answer: As per Rule 3 of the IDS Rules, the fair market value of an immovable property shall be the higher of its cost of acquisition and the price that the property shall ordinarily fetch if it is sold in the open market as on 1st June, 2016. The value mentioned in the registered deed shall be relevant for determining the cost of acquisition and the same can be taken as the fair market value only where it is higher than the price that the property shall ordinarily fetch if sold in the open market as on 1st June, 2016.

Question No.8: In case a declaration relating to investment in undisclosed asset is made under the Scheme, whether any investigation will be initiated against the seller in respect of such declaration?

Answer: No.

Question No.9: What are the advantages of the Scheme as against declaring the past undisclosed income as current income in the return of income to be filed for Assessment Year 2017-18? How will the Department identify the year in which the undisclosed income was earned.

Answer: In this regard, the following points may be noted:

Declaration of past undisclosed income in the current year amounts to false verification of return of income which shall attract prosecution under the Income-tax Act.

If anyone attempts to disclose past undisclosed income in the current year, he will have to explain the source of income and substantiate the manner of earning the said income. In case of disclosure under the Scheme, there is no need to explain the source of income.

Declaration of past undisclosed income in the current year cannot explain assets acquired in the past or provide any immunity in respect of the same.

The Income-tax Department is in receipt of large volume of information from various sources such as registrars of property, banks, financial institutions, stock exchanges, tax deductors etc. The Department has launched a comprehensive data-mining and compliance management programme in the form of ‘Project Insight’ which will generate a large volume of reliable information about financial transactions undertaken by taxpayers and the relevant year in which the transaction was undertaken.

Question No.10: In a case the declarant earned undisclosed income of ₹ 90 lakh in previous year 2010-11. Out of the same, he acquired an immovable property in the previous year 2011-12 for ₹ 50 lakh, made personal expenditure to the extent of ₹ 20 lakh and balance ₹ 20 lakh is left with him as cash in hand on 1-6-2016. The fair market value of the immovable property as on 1-6-2016 is ₹ 80 lakh. What is the amount to be declared under the Scheme?

Answer: The declarant in this case has to declare the following:

(i) ₹ 80 lakh being fair market value of the immovable property as on 1-6-2016

(ii) ₹ 20 lakh being the cash in hand as on 1-6-2016

(iii) ₹ 20 lakh being the balance of undisclosed income [₹ 90 lakh – (₹ 50 lakh + ₹ 20 lakh)] which is not represented in the form of investment in any asset.

Thus the total undisclosed income to be declared in this case will be ₹ 1.20 crore.

Question No.11: A person invested his undisclosed income in a house property in the previous year 2010-11 which has not been let out. The person also owned another house property from disclosed sources, which has been claimed as self-occupied property for the purposes of computation of income under the head income from house property. In case the person declares the undisclosed house property at its fair market value on 1-6-2016, whether any action will be taken for bringing the annual value of the undisclosed property to tax as income from house property by deeming it to be let property as provided under section 23(4)(b) of the Income-tax Act for the earlier previous years?

Answer: No. However, where the house property was let-out during the relevant period, the actual rent received or receivable will be required to be declared under the Scheme in addition to the fair market value of the house property as on 1-6-2016.

F.No.142/8/2016-TPL
Government of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes
(TPL Division)

Dated 27th of June, 2016

Clarifications on the Income Declaration Scheme, 2016

The Income Declaration Scheme, 2016 (hereinafter referred to as ‘the Scheme’) incorporated as Chapter IX of the Finance Act, 2016 provides an opportunity to persons who have not paid full taxes in the past to come forward and declare the undisclosed income and pay tax, surcharge and penalty totalling in all 45% of such undisclosed income declared. The Income Declaration Scheme Rules, 2016 (hereinafter referred to as ‘the Rules’) have been notified. In this regard, Circular No. 17 of 2016 dated 20th May, 2016 issued by the Board provided clarifications to 14 queries. Subsequently, further queries have been received from the public about various provisions of the Scheme. The Board has considered the same and the following clarifications are issued.-

Question No.1: If only part payment of the tax, surcharge and penalty payable on undisclosed income declared under the Scheme is made before 30.11.2016, then whether the entire declaration fails as per section 187(3) of the Finance Act, 2016 or pro-rata declaration on which tax, surcharge and penalty has been paid remains valid?

Answer: In case of part payment, the entire declaration made under the Scheme shall be invalid. The declaration under the Scheme shall be valid only when the complete payment of tax, surcharge and penalty is made on or before 30.11.2016.

Question No.2: In case of amalgamation or in case of conversion of a company into LLP, if the amalgamated entity or LLP, as the case may be, wants to declare for the year prior to amalgamation/conversion, then whether a declaration is to be filed in the name of amalgamated entity/LLP or in the name of the amalgamating company or company existing prior to conversion into LLP?

Answer: Since the amalgamating company or the company prior to conversion into LLP is no more into existence and the assets/liabilities of such erstwhile entities have been taken over by the amalgamated company/LLP, the declaration is to be made in the name of the amalgamated company or the LLP, as the case may be, for the year in which the amalgamation/conversion takes place.

Question No.3: Whether the Scheme is open only to residents or to non-residents also?

Answer: The Scheme is available to every person, whether resident or non-resident.

Question No.4: If undisclosed income relating to an assessment year prior to A.Y. 2016-17, say A.Y. 2001-02 is detected after the closure of the Scheme, then what shall be the treatment of undisclosed income so detected?

Answer: As per the provisions of section 197(c) of the Finance Act, 2016, such income of A.Y. 2001-02 shall be assessed in the year in which the notice under sections 148 or 153A or 153C, as the case may be, of the Income-tax Act is issued by the Assessing Officer. Further, if such undisclosed income is detected in the form of investment in any asset then value of such asset shall be as if the asset has been acquired or made in the year in which the notice under section 148/153A/153C is issued and the value shall be determined in accordance with rule 3 of the Rules.

Question No.5: Whether a person on whom a search has been conducted in April, 2016 but notice under section 153A is not served upto 31.05.2016, is eligible to declare undisclosed income under the Scheme?

Answer: No, in such a case time for issuance of notice under section 153A has not expired. Hence the person is not eligible to avail the Scheme in respect of assessment years for which notice under section 153A can be issued.

Question No.6: As per Circular No.17 of 2016, question No.14, it is not mandatory to attach the valuation report. But Form-1 states “attach valuation report”. How to interpret?

Answer: It is necessary for the declarant to obtain the valuation report but it is not mandatory for him to attach the same with the declaration made in Form-1. However, the jurisdictional Pr. Commissioner/Commissioner in order to ascertain the correctness of the value of the asset quoted in Form-1 may require the declarant to file the valuation report before issuing the acknowledgment in Form-2. In such a circumstance, it will be necessary for the declarant to make the report available to the Pr. Commissioner/Commissioner.

Question No.7: Is it mandatory to furnish PAN in the Form of declaration?

Answer: Yes, PAN is the unique identifier for all direct tax purposes. This is also necessary in order to claim the benefits and immunities available under the Scheme.

Question No.8: If any proceeding is pending before the Settlement Commission, can a person be considered eligible for the Scheme?

Answer: No, a person shall not be eligible for the Scheme in respect of assessment years for which proceeding is pending with Settlement Commission.

Question No.9: Land is acquired by the assessee in year 2001 from assessed income and is regularly disclosed in return of income. Subsequently in the year 2014, a building is constructed on the said land and the construction cost is not disclosed by the assessee. What shall be the fair market value of such building for the purposes of the Scheme?

Answer: Fair market value of land and building in such a case shall be computed in accordance with Rule 3(2) by allowing proportionate deduction in respect of asset acquired from assessed income.

Question No.10: Whether cases where summons under section 131(1A) have been issued by the Department or letter under the Non-filer Monitoring System (NMS) or under section 133(6) are issued are eligible for the Scheme?

Answer: Cases where summons under section 131(1A) have been issued by the department or letters for enquiry under NMS or under section 133(6) are issued but no notice under section 142 or 143(2) or 148 or 153A or 153C [as specified in section 196(e)] of the Finance Act, 2016 has been issued are eligible for the Scheme.

Question No.11: If notices under sections 142, 143(2) or 148 have been issued after 31.05.2016 and assessee makes declaration under the Scheme then what shall be the fate of these notices?

Answer: As clarified vide Explanatory Circular No. 17 dated 20.5.2016, a person shall not be eligible for the Scheme in respect of the assessment year for which a notice under sections 142, 143(2) or 148 has been received by him on or before 31.5.2016. In a case where notice has been received after the said date, the assessee shall be eligible to make a declaration under the Scheme for the said assessment year. Such declaration shall be valid if it has not been made by suppression of facts or misrepresentation and the amount payable under the Scheme has been duly paid within the specified time. On furnishing by the declarant the certificate issued by the Pr. Commissioner/Commissioner in Form-4 to the Assessing Officer, the proceedings initiated vide notice under sections 142, 143(2) or 148 shall be deemed to have been closed.

F.No I87 / 10 / 20 16.ITA.I
Government of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes

(Income-Tax)

New Delhi, the 25th May, 2016

Income Declaration Scheme, 2016, introduced vide Finance Act, 2016 (28 of 20l6), provides an opportunity to persons who have not paid full taxes in the past to come forward and declare their undisclosed income. Rule 4 of the Income Declaration Scheme Rules, 2016 provides that a declaration of income or income in the form of investment in any asset u/s. 183 shall be made in the prescribed marner to the Principal Commissioner or the Commissioner who exercises jurisdiction over the declarant.

2. It is, therefore, clarified that the jurisdictional Principal Comrnissioner or the Commissioner, as the case may be, who exercises jurisdiction u/s. 120 of the Income-tax Act, 1961, as notified by CBDT from time to time over such declarant, shall be the Principal Commissioner or the Commissioner as referred to in section 186 of the Income Declaration Scheme 2016 to whom declaration under 183 of that Scheme is to be made.

Note: Notifications of the Government of India, Central Board of Direct Taxes, pertaining to the jurisdiction u/s. 120 of the Income-tax Act, 1961 – Published in the Gazette of India, Extraordinary, Part-II Section 3, Sub-section (ii)- S.O. 2752(E) dated 22.10.2014, S.O. 2754 (E) dated 22.10.2014, S.O. 2814 (E) dated 03.11.2014, S.O. 2885 (E) dated 12.11.2014, S.O. 3244 (E) dated 19.12.2014, S.O. 2911 (E) dated 13.11.2014, S.O. 2922 (E) dated 15.11.2014, S.O. 2915 (E) dated 13.11.2014, S.O. 3911 (E) dated 16.12.2014, S.O. 355 (E) dated 05.02.2015, S.O. 2812 (E) dated 13.10.2015.

F.No.142/8/2016-TPL
Government of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes
(TPL Division)

Dated 20th of May, 2016

Clarifications on the Income Declaration Scheme, 2016

The Income Declaration Scheme, 2016 (hereinafter referred to as ‘the Scheme’) incorporated as Chapter IX of the Finance Act, 2016 provides an opportunity to persons who have not paid full taxes in the past to come forward and declare the undisclosed income and pay tax, surcharge and penalty totalling in all the 45% of such undisclosed income declared. The Income Declaration Scheme Rules, 2016 (hereinafter referred to as ‘the Rules’) have been notified. In regard to the scheme queries have been received from the public about the scope of the scheme and the procedure to be followed. The Board has considered the same and decided to clarify the points raised by issue of a circular in the form of questions and answers as follows.-

Question No.1: Where an undisclosed income in the form of investment in asset is declared under the Scheme and tax, surcharge and penalty is paid on the fair market value of the asset as on 1-6-2016, then will the declarant be liable for capital gains on sale of such asset in the future? If yes, then how will the capital gains in such case be computed?

Answer: Yes, the declarant will be liable for capital gains under the Income-tax Act on sale of such asset in future. As per the current provisions of the Income-tax Act, the capital gains is computed by deducting cost of acquisition from the sale price. However, since the asset will be taxed at its fair market value the cost of acquisition for the purpose of Capital Gains shall be the fair market value as on 1-6-2016 and the period of holding shall start from the said date (i.e. the date of determination of fair market value for the purposes of the Scheme).

Question No.2: Where a notice under sections 142(1)/ 143(2)/ 148/ 153A/ 153C of the Income-tax Act has been issued to a person for an assessment year will he be ineligible from making a declaration under the Scheme?

Answer: The person will only be ineligible from declaration for those assessment years for which a notice under sections 142(1)/143(2)/148/153A/153C is issued and the proceeding is pending before the Assessing Officer. He is free to declare undisclosed income for other years for which no notice under above referred sections has been issued.

Question No.3: As per the Scheme, declaration cannot be made where an undisclosed asset has been acquired during any previous year relevant to an assessment year for which a notice under sections 142, 143(2), 148, 153A or 153C of the Income-tax Act has been issued. If the notice has been issued but not served on the declarant then how will he come to know whether the notice has been issued?

Answer: The declarant will not be eligible for declaration under the Scheme where the undisclosed income relates to the assessment year where a notice under sections 142, 143(2), 148, 153A or 153C of the Income-tax Act has been issued and served on the declarant on or before 31st day of May, 2016. The declarant is required to file a declaration regarding receipt of any such notice in Form-1.

Question No.4: In a case where the undisclosed income is represented in the form of investment in asset and such asset is partly from income that has been assessed to tax earlier, then what shall be the method of computation of undisclosed income represented by such undisclosed asset for the purposes of the Scheme?

Answer: As per sub-rule (2) of Rule 3 of the Income Declaration Scheme Rules, 2016, where investment in any asset is partly from an income which has been assessed to tax, the undisclosed income represented in form of such asset will be the fair market value of the asset determined in accordance with sub-rule (1) of Rule 3 as reduced by an amount which bears to the value of the asset as on the 1-6-2016, the same proportion as the assessed income bears to the total cost of the asset. This is illustrated by an example as under:

Investment in acquisition of asset in previous year 2013-14 is of ₹ 500 out of which ₹ 200 relates to income assessed to tax in A.Y. 2012-13 and ₹ 300 is from undisclosed income pertaining to previous year 2013-14. The fair market value of the asset as on 1-6-2016 is ₹ 1500.

The undisclosed income represented by this asset under the scheme shall be:

	(1500 X 200)
1500 minus	____________________	= ₹ 900
	500

Question No.5: Can a declaration be made of undisclosed income which has been assessed to tax and the case is pending before an Appellate Authority?

Answer: As per section 189 of the Finance Act, 2016, the declarant is not entitled to reopen any assessment or reassessment made under the Income-tax Act. Therefore, he is not entitled to avail the tax compliance in respect of such income. However, he can declare other undisclosed income for the said assessment year which has not been assessed under the Income-tax Act.

Question No.6: Can a person against whom a search/survey operation has been initiated file declaration under the Scheme?

Answer: (a) The person is not eligible to make a declaration under the Scheme if a search has been initiated and the time for issuance of notice under section 153A has not expired, even if such notice for the relevant assessment year has not been issued. In this case, however, the person is eligible to file a declaration in respect of an undisclosed income in relation to an assessment year which is prior to assessment years relevant for the purpose of notice under section 153A.

(b) In case of survey operation the person is barred from making a declaration under the Scheme in respect of an undisclosed income in which the survey was conducted. The person is, however, eligible to make a declaration in respect of an undisclosed income of any other previous year.

Question No. 7: Where a search/survey operation was conducted and the assessment has been completed but certain income was neither disclosed nor assessed, then whether such unassessed income can be declared under the Scheme?

Answer: Yes, such undisclosed income can be declared under the Scheme.

Question No. 8: What are the consequences if no declaration under the Scheme is made in respect of undisclosed income prior to the commencement of the Scheme?

Answer: As per section 197(c) of the Finance Act, 2016, where any income has accrued or arisen or received or any asset has been acquired out of such income prior to the commencement of the Scheme and no declaration is made under the Scheme, then such income shall be deemed to have been accrued, arisen or received or the value of the asset acquired out of such income shall be deemed to have been acquired in the year in which a notice under sections 142/143(2)/148/153A/153C is issued by the Assessing Officer and the provisions of the Income-tax Act shall apply accordingly.

Question No. 9: If a declaration of undisclosed income is made under the Scheme and the same was found ineligible due to the reasons listed in section 196 of the Finance Act, 2016, then will the person be liable for consequences under section 197(c) of the Finance Act, 2016?

Answer: In respect of such undisclosed income which has been duly declared in good faith but not found eligible, then such income shall not be hit by section 197(c) of the Finance Act, 2016. However, such undisclosed income may be assessed under the normal provisions of the Income-tax Act, 1961.

Question No. 10: If a person declares only a part of his undisclosed income under the Scheme, then will he get immunity under the Scheme in respect of the part income declared?

Answer: It is expected that one should declare all his undisclosed income. However, in such a case the person will get immunity as per the provisions of the Scheme in respect of the undisclosed income declared under the Scheme and no immunity will be available in respect of the undisclosed income which is not declared.

Question No. 11: Can a person declare under the Scheme his undisclosed income which has been acquired from money earned through corruption?

Answer: No. As per section 196(b) of the Finance Act, 2016, the Scheme shall not apply, inter alia, in relation to prosecution of any offence punishable under the Prevention of Corruption Act, 1988. Therefore, declaration of such undisclosed income cannot be made under the Scheme. However, if such a declaration is made and in an event it is found that the income represented money earned through corruption it would amount to misrepresentation of facts and the declaration shall be void under section 193 of the Finance Act, 2016. If a declaration is held as void, the provisions of the Income-tax Act shall apply in respect of such income as they apply in relation to any other undisclosed income.

Question No.12: Whether at the time of declaration under the Scheme, will the Principal Commissioner/Commissioner do any enquiry in respect of the declaration made?

Answer: After the declaration is made the Principal Commissioner/ Commissioner will enquire whether any proceeding under sections 142(1)/143(2)/148/153A/153C is pending for the assessment year for which declaration has been made. Apart from this no other enquiry will be conducted by him at the time of declaration.

Question No. 13: Will the declarations made under the Scheme be kept confidential?

Answer: The Scheme incorporates the provisions of section 138 of the Income-tax Act relating to disclosure of information in respect of assessees. Therefore, the information in respect of declaration made is confidential as in the case of return of income filed by assessees.

Question No.14: Is it necessary to file a valuation report of an undisclosed income represented in the form of investment in asset along with the declaration under the Scheme?

Answer: It is not mandatory to file the valuation report of the undisclosed income represented in the form of investment in asset along with the declaration. However, the declarant should have the valuation report. While e-filing the declaration on the departmental website a facility for uploading the documents will be available.

F.No.370142/8/2016-TPL
Government of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes
(TPL Division)

Dated 20th May, 2016

EXPLANATORY NOTES ON PROVISIONS OF THE INCOME DECLARATION SCHEME, 2016 AS PROVIDED IN CHAPTER IX OF THE FINANCE ACT, 2016

Introduction

The Income Declaration Scheme, 2016 (referred to here as ‘the Scheme’) is contained in the Finance Act, 2016, which received the assent of the President on the 14th of May, 2016.

2. The Scheme provides an opportunity to persons who have not paid full taxes in the past to come forward and declare the undisclosed income and pay tax, surcharge and penalty totalling in all to forty-five per cent of such undisclosed income declared.

Scope of the Scheme

3. A declaration under the aforesaid Scheme may be made in respect of any income or income in the form of investment in any asset located in India and acquired from income chargeable to tax under the Income-tax Act for any assessment year prior to the assessment year 2017-18 for which the declarant had, either failed to furnish a return under section 139 of the Income-tax Act, or failed to disclose such income in a return furnished before the date of commencement of the Scheme, or such income had escaped assessment by reason of the omission or failure on the part of such person to make a return under the Income-tax Act or to disclose fully and truly all material facts necessary for the assessment or otherwise.

Where the income chargeable to tax is declared in the form of investment in any asset, the fair market value of such asset as on 1st June, 2016 computed in accordance with Rule 3 of the Income Declaration Scheme Rules, 2016 shall be deemed to be the undisclosed income.

Rate of tax, surcharge and penalty

4. The person making a declaration under the Scheme would be liable to pay tax at the rate of 30 per cent of the value of such undisclosed income as increased by surcharge at the rate of 25 per cent of such tax. In addition, he would also be liable to pay penalty at the rate of 25 percent of such tax. Therefore, the declarant would be liable to pay a total of 45 percent of the value of the undisclosed income declared by him. This special rate of tax, surcharge and penalty specified in the Scheme will override any rate or rates specified under the provisions of the Income-tax Act or the annual Finance Acts.

Time limits for declaration and making payment

5. A declaration under the Scheme can be made any time on or after 1st June, 2016 but before a date to be notified by the Central Government. The Central Government has further notified 30th September, 2016 as the last date for making a declaration under the Scheme and 30th November, 2016 as the last date by which the tax, surcharge and penalty mentioned in para 4 above shall be paid. Accordingly, a declaration under the Scheme in Form 1 as prescribed in the Rules may be made at any time before 30-9-2016. After such declaration has been furnished, the jurisdictional Principal CIT/CIT will issue an acknowledgment in Form-2 to the declarant within 15 days from the end of the month in which the declaration under Form-1 is made. The declarant shall not be liable for any adverse consequences under the Scheme in respect of any income which has been duly declared but has been found ineligible for declaration. However, such information may be used under the provisions of the Income-tax Act. The declarant shall furnish proof of payment made in respect of tax, surcharge and penalty to the jurisdictional Principal CIT/CIT in Form 3 after which the said authority shall issue a certificate in Form-4 of the accepted declaration within 15 days of submission of proof of payment by the declarant.

Form for declaration

6. As per the Scheme, declaration is to be made in such form and shall be verified in such manner as may be prescribed. The form prescribed for this purpose is Form-1 which has been duly notified. The table below mentions the persons who are authorised to sign the said form:

The declaration may be filed online on the e-filing website of the Income-tax Department using the digital signature of the declarant or through electronic verification code or in paper form before the jurisdictional Principal CIT/CIT.

Declaration not eligible in certain cases

7. As per the provisions of the Scheme, no declaration can be made in respect of any undisclosed income chargeable to tax under the Income-tax Act for assessment year 2016-17 or any earlier assessment year in the following cases—

1. where a notice under section 142 or section 143(2) or section 148 or section 153A or section 153C of the Income-tax Act has been issued in respect of such assessment year and the proceeding is pending before the Assessing Officer. For the purposes of declaration under the Scheme, it is clarified that the person will not be eligible under the Scheme if any notice referred above has been served upon the person on or before 31st May, 2016 i.e., before the date of commencement of this Scheme.
   In the form of declaration (Form 1) the declarant will verify that no such notice has been received by him on or before 31st May, 2016.

2. where a search has been conducted under section 132 or requisition has been made under section 132A or a survey has been carried out under section 133A of the Income-tax Act in a previous year and the time for issuance of a notice under section 143(2) or section 153A or section 153C for the relevant assessment year has not expired. In the form of declaration (Form 1) the declarant will also verify that these facts do not prevail in his case.

3. cases covered under the Black Money (Undisclosed Foreign Income & Assets) and Imposition of Tax Act, 2015.

A person in respect of whom proceedings for prosecution of any offence punishable under Chapter IX (offences relating to public servants) or Chapter XVII (offences against property) of the Indian Penal Code or under the Unlawful Activities (Prevention) Act or the Narcotic Drugs and Psychotropic Substances Act or the Prevention of Corruption Act are pending shall not be eligible to make declaration under the Scheme.

A person notified under section 3 of the Special Court (Trial of Offences Relating to Transactions in Securities) Act or a person in respect of whom an order of detention has been made under the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, subject to the conditions specified in the Scheme, shall also not be eligible for making a declaration under the Scheme.

Circumstances where declaration shall be invalid

8. In the following situations, a declaration shall be void and shall be deemed never to have been made:

1. If the declarant fails to pay the entire amount of tax, surcharge and penalty within the specified date, i.e., 30.11.2016;

2. Where the declaration has been made by misrepresentation or suppression of facts or information.

Where the declaration is held to be void for any of the above reasons, it shall be deemed never to have been made and all the provisions of the Income-tax Act, including penalties and prosecutions, shall apply accordingly.

Any tax, surcharge or penalty paid in pursuance of the declaration shall, however, not be refundable under any circumstances.

Effect of valid declaration

9. Where a valid declaration as detailed above has been made, the following consequences will follow:

1. The amount of undisclosed income declared shall not be included in the total income of the declarant under the Income-tax Act for any assessment year;

2. The contents of the declaration shall not be admissible in evidence against the declarant in any penalty or prosecution proceedings under the Income-tax Act and the Wealth-tax Act;

3. Immunity from the Benami Transactions (Prohibition) Act, 1988 shall be available in respect of the assets disclosed in the declarations subject to the condition that the benamidar shall transfer to the declarant or his legal representative the asset in respect of which the declaration of undisclosed income is made on or before 30th September, 2017;

4. The value of asset declared in the declaration shall not be chargeable to Wealth-tax for any assessment year or years.

5. Declaration of undisclosed income will not affect the finality of completed assessments. The declarant will not be entitled to claim reassessment of any earlier year or revision of any order or any benefit or set off or relief in any appeal or proceedings under the Income-tax Act in respect of declared undisclosed income or any tax, surcharge or penalty paid thereon.

Income Declaration Scheme

Clauses 178 to 196 of the Bill seeks to insert a new Chapter IX relating to Income Declaration Scheme, 2016. The said Scheme, inter alia, provides for declaration of undisclosed income by any person. The Scheme shall be in operation from the 1st day of June, 2016 till a date to be notified by the Central Government in the Official Gazette. The proposed Chapter, inter alia, provides for levying a tax of thirty per cent on the undisclosed income declared in the Scheme, a surcharge at the rate of twenty-five per cent of such tax as Krishi Kalyan Cess; and penalty at the rate of twenty- five per cent of tax; procedure and manner of filing the declaration under the said Scheme; undisclosed income declared under the said Scheme not be included in the total income or affect finality of completed assessments; income declared under the said Scheme shall not be refundable; exemption from wealth-tax in respect of assets specified in declaration; power to remove difficulty by the Central Government and power of Central Board of Direct Taxes with the approval of the Central Government to make rules for the purposes of the said Scheme.

The Finance Minister explained the Income Declaration Scheme, 2016 in his budget speech for 2016-17 in specific section for reducing litigation and providing certainty in taxation. (2016) 381 ITR 9 (St.)(35)

“We are moving towards a lower tax regime with non-litigious approach. Thus, while compliant taxpayers can expect a supportive interface with the department, tax evasion will be countered strongly. Capability of the tax department to detect tax evasion has improved because of enhanced access to information and availability of technology driven analytical tools to process such information. I want to give an opportunity to the earlier non-compliant to move to the category of compliant.

I propose a limited period Compliance Window for domestic taxpayers to declare undisclosed income or income represented in the form of any asset and clear up their past tax transgressions by paying tax at 30%, and surcharge at 7.5% and penalty at 7.5%, which is a total of 45% of the undisclosed income. There will be no scrutiny or enquiry regarding income declared in these declarations under the Income-tax Act or the Wealth-tax Act and the declarants will have immunity from prosecution. Immunity from Benami Transaction (Prohibition) Act, 1988 is also proposed subject to certain conditions. The surcharge levied at 7.5% of undisclosed income will be called Krishi Kalyan surcharge to be used for agriculture and rural economy. We plan to open the window under this Income Disclosure Scheme from 1st June to 30th September, 2016 with an option to pay amount due within two months of declaration.

Our Government is fully committed to remove black money from the economy. Having given one opportunity for evaded income to be declared once, we would then like to focus all our resources for bringing people with black money to book.”

1 Background

In his Budget Speech on 29th February, 2016, the Finance Minister has listed 9 objectives for his tax proposals. One of the objectives relates to “Reducing litigation and providing certainty in taxation”. Paras 159 to 161 of the Budget Speech deal with Income Declaration Scheme announced by him and read as under:

“159. We are moving towards a lower tax regime with non-litigious approach. Thus, while compliant taxpayers can expect a supportive interface with the department, tax evasion will be countered strongly. Capability of the tax department to detect tax evasion has improved because of enhanced access to information and availability of technology driven analytical tools to process such information. I want to give an opportunity to the earlier non-compliant to move to the category of compliant.

160. I propose a limited period Compliance Window for domestic taxpayers to declare undisclosed income or income represented in the form of any asset and clear up their past tax transgressions by paying tax at 30%, and surcharge at 7.5% and penalty at 7.5%, which is total of 45% of the undisclosed income. There will be no scrutiny or enquiry regarding income declared in these declarations under the Income-tax Act or the Wealth-tax Act and the declarants will have immunity from prosecution. Immunity from Benami Transaction (Prohibition) Act, 1988 is also proposed subject to certain conditions. The surcharge levied at 7.5% of undisclosed income will be called Krishi Kalyan Surcharge to be used for agriculture and rural economy. We plan to open the window under this Income Disclosure Scheme from 1st June to 30th September, 2016 with an option to pay amount due within two months of declaration.

161. Our Government is fully committed to remove black money from the economy. Having given one opportunity for evaded income to be declared once, we would then like to focus all our resources for bringing people with black money to books”.

In Chapter IX (Sections 178 to 196) of the Finance Act, 2016 (Act), “The Income Declaration Scheme, 2016”, has been announced. The provisions of this scheme are discussed in this article.

2. The Scheme

This scheme is akin to a Voluntary Disclosure Scheme. The scheme has come into force on 1st June, 2016. The declaration for undisclosed domestic income or assets can be made in the prescribed Form No. 1 within 4 months i.e., on or before 30th September, 2016. The tax at the rate of 30% of the disclosed income will be payable with surcharge called Krishi Kalyan Surcharge at 7.5% and penalty at 7.5%. Hence total amount payable will be 45% of the income declared by the assessee under the scheme. This tax, surcharge and penalty will be payable on or before 30th November, 2016.

3. Who can make declaration under the scheme

Any Individual, HUF, AOP, BOI, Firm, LLP or company can make a declaration of undisclosed income or assets during the specified period (1-6-2016 to 30-9-2016). However, Section 193 of the Finance Act, provides that following persons cannot make the declaration under the scheme.

1. Any person in respect of whom an order of detention has been made under the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974.

2. Any person in respect of whom prosecution has been launched for an offence punishable under Chapter IX or Chapter XVII of the Indian Penal Code, the Narcotic Drugs and Psychotropic Substances Act, 1985, the Unlawful Activities (Prevention) Act 1967 and the Prevention of Corruption Act, 1988.

3. Any person who is notified u/s. 3 of the Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992.

4. The scheme is not applicable in relation to any undisclosed foreign income and asset which is chargeable to tax under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015.

5. Declaration cannot be made in relation to any undisclosed income chargeable to tax under the Income-tax Act for any previous year relevant to Assessment Year A. Y. 2016-17 or earlier years where –

   1. Notice u/s. 142, 143(2), 148, 153A or 153C of the Income tax Act has been issued and the assessment for that year is pending.

   2. Search u/s. 132 or requisition u/s 132A or survey u/s. 133A of the Income-tax Act has been made in the previous year and notices u/s. 143(2), 153A or 153 C have not been issued and the time limit for issue of such notices has not expired.

   3. Information has been received by the competent authority under an agreement entered into by the Government u/s. 90 or 90A of the Income-tax Act in respect of such undisclosed asset.

4. Which income or assets can be declared

Section 180 of the Finance Act provides that every eligible person can make declaration under the Scheme in respect of the undisclosed income earned in any year prior to 1-4-2016. For this purpose income which can be disclosed will be as under.

1. Income for which the person has failed to furnish return of income u/s. 139 of the Income-tax Act.

2. Income which the person has failed to disclose in the return filed before 1-6-2016.

3. Income which has escaped assessment by reason of the failure on the part of the person to disclose the same.

4. Where such undisclosed income is held in the form of investment in any asset, the fair market value of such asset as at 1-6-2016 shall be deemed to be the undisclosed income. CBDT has issued the Income Declaration Scheme Rules, 2016. Rule 3 of these Rules provides for the method for determining the Fair Market Value of such assets.

5. No deduction for any expenditure or allowance shall be allowed against the income which is disclosed under the scheme.

5. Manner of declaration

1. The declaration under the scheme is to be made in Form No. 1 prescribed by Rule 4 of the above Rules electronically. The same is to be submitted to the Principal Commissioner of Income-tax or the Commissioner of Income Tax who is authorised to receive the same. He has to issue an acknowledgement in Form No. 2 within 15 days from the end of the month in which declaration is filed. The declaration is to be signed by the authorised person as provided in Section 183 of the Finance Act. A person who has made a declaration under the scheme cannot make another declaration of his income or income of any other person. If such second declaration is made it will be considered as void. It is also provided that if a declaration under the scheme has been made by misrepresentation or suppression of facts, such declaration shall be treated as void.

2. As stated earlier, the tax (including surcharge and penalty) of 45% of the income declared is to be paid on or before 30-11-2016. The proof of such payment is to be furnished to the concerned Commissioner in Form No. 3. Thereafter the CIT will have to give a certificate in Form No. 4 to the declarant within 15 days of submission of Form No. 3 in respect of the Income declared. If this payment is not made, the declaration will be considered as void. In this case, if any tax is deposited, the same will not be refunded. If the declaration is considered as void, the amount declared by the person will be deemed to be income of the declarant and will be added to the other income of the declarant and assessed under the Income-tax Act in the year in which such declaration is made. If the declarant has paid the tax, surcharge and penalty due as per the declaration before the due date, the income so disclosed will not be added to the income of any year. There will be no scrutiny or enquiry regarding such income under the Income- tax Act or the Wealth-tax Act.

3. The declarant shall not be entitled to reopen any assessment or reassessment made under the Income-tax Act or Wealth- tax Act or claim any set off or relief in any appeal, reference or other proceedings in relation such assessment or reassessment. In other words, declaration under the scheme shall not affect the finality of any completed assessments.

6. Immunity

1. The scheme provides for immunity from proceedings under other Acts as under:

   1. Provisions of Benami Transactions (Prohibition) Act, 1988, shall not apply in respect of the assets declared even if such assets exist in the name of ‘Binamidar’. This is subject to the condition that the Binamidar transfers the asset to the declarant on or before 30th September, 2017.

   2. No Wealth tax shall be payable under the Wealth-tax Act in respect of any undisclosed cash, bank deposits, bullion, jewellery, investments or any other asset declared under the scheme.

   3. No prosecution will be launched against the declarant under the Scheme in respect of any income/asset declared under the Income tax or Wealth-tax Acts.

2. It is also provided that nothing contained in the declaration made under the Scheme shall be admissible in evidence against the declarant under any other law for the purpose of any proceedings relating to imposition of penalty or for the purposes of prosecution under the Income-tax Act or Wealth-tax Act.

3. It may be noted that no immunity is provided in the scheme from proceedings under the Foreign Exchange Management Act, Money Laundering Act, Indian Penal Code, Central Excise Act, Customs Act, Service Tax provisions, VAT provisions or other Acts.

7. Determination of market value of the assets

As stated earlier, CBDT has prescribed “Income Declaration Scheme Rules, 2016” on 19.5.2016. Rule 3 deals with determination of Fair Market Value of the asset declared in Form No.1. Broadly stated this Rule provides as under:

(i) Value of bullion, jewellery or precious stone, archaeological collections, drawings, paintings, sculptures or any work of art

Its cost of acquisition or the price which such asset will ordinarily fetch if sold in the open market as on 1-6-2016, whichever is higher. This should be determined on the basis of the valuation report obtained by the declarant from a Registered Valuer.

(ii) Value of quoted shares or securities

Cost of acquisition or the average of the lowest and highest price quoted on the recognized Stock Exchange as on 1-6-2016 whichever is higher

(iii) Value of unquoted equity shares and securities

Cost of acquisition or the value as on 1-6-2016 as per the formula given in Rule 3, whichever is higher.

(iv) Value of unquoted shares and securities (other than equity shares)

Cost of acquisition or value as on 1-6-2016 as determined by a registered valuer whichever is higher.

(v) Immovable property

cost of acquisition or market value as on 1-6-2016 as determined by a Registered valuer. In circular No. 25/2016 dated 30-6-2016 it is clarified that market value determined by a registered valuer will be considered even if such value is lower than the value on 1-6-2016 as per Stamp Duty Valuation (Ready Recokner Value) as provided in section 50C.

(vi) Share in partnership

Share in Partnership is to be determined as per the formula given in the Rule.

(vii) Any other asset

For any other asset, the cost of acquisition or the price which the asset will fetch is sold in the open market on 1-6-2016 whichever is higher.

8. Some claritifcations by cbdt

CBDT has issued certain clarifications about the contents of the above Scheme in various Circulars. Some of the clarifications made are as under:

8.1 Circular No.7 of 2016 dated 20.05.2016.

1. If any person declares any asset under the Scheme and pays tax at the rate of 45% on the market value as at 1-6-2016, he will be liable to pay capital gains tax when he sells that asset at a later date. For this purpose, the market value on 1.6.2016 declared by him will be treated as cost of acquisition of the asset for computing capital gain. The period of holding will be computed from 1-6-2016.

2. It is clarified that an assessee in whose case notice u/s. 142(1), 143(2), 148, 153A or 153C is issued for any year on or before 31-5-2016 will be not be able to take advantage of this scheme for the year for which such notice is issued. He can make the declaration for other years. If such notice is issued on or after 1.6.2016, declaration under the scheme can be made even for the year for which such notice is issued. It is further clarified in Circular No: 24/2016 that such notices issued on or after 1-6-2016 shall be deemed to have been closed after the declarant furnishes the Certificate in Form No.4 certifying that the declaration is accepted by the CIT and the declarant has paid the taxes due under the scheme.

3. If the assessee has acquired an asset partly from declared income and partly from undisclosed income, the declaration can be made by ascertaining the proportionate amount of undisclosed income as under:

If the asset is acquired in F.Y. 2013-14 for ₹ 500 out of which ₹ 200 is from declared income and ₹300 is from undisclosed income, the declaration in Form No.1 can be made for ₹ 900 as under:

If the Fair Market Value of the asset on 1-6-2016 is ₹ 1,500 the amount to be declared will be ₹ 1,500 – (1,500 – 200) = ₹ 900500

4. If any appeal for any assessment year is pending, the assessee cannot declare the income which is covered by the matter in dispute in appeal. However, he can declare any other income for that year which is not declared by him earlier and which is not subject matter in appeal.

5. It is not mandatory to file valuation report about Fair Market Value of the asset declared in Form No. 1. However, the declarant should get such report from the registered valuer before making the declaration. If the declarant wants to file this report with Form No. 1, facility for uploading the same will be available. It is further clarified in Circular No. 24/2016 that the CIT in order to ascertain the correctness of the value of the asset may require the declarant to file this report before issuing acknowledgement in Form No. 2.

6. A person in whose case search/ survey operation is initiated cannot file declaration for undisclosed income for the year covered by the years for which such action is initiated. He can, however, file declaration for undisclosed income of other years. If assessments are made for the years for which search/survey his made, the assesse can declare any undisclosed income which has not been assessed in this year.

7. Declaration under the scheme cannot be made in respect of undisclosed income earned or asset acquired from monies earned through corruption.

8. After the declaration is made, the CIT can only make inquiry to ascertain whether action u/s. 142(1)/143(2)/148/153A/153C is pending for any of the years. Apart from this no other enquiry will be made. It is further clarified in Circular No. 25/2016 that if a valid declaration is made and tax (45%) is paid, department will not make any enquiry about the source of such income or payment of tax, including surcharge and penalty.

8.2 Circular No. 24/2016 dated 27-6-2016

1. If only part payment of tax, surcharge and penalty due as per the declaration is made on or before 30-11-2016, the declaration will treated as invalid.

2. The scheme is open to Residents as well as Non-Residents in respect of undisclosed domestic Income.

3. If undisclosed income for A.Y. 2001-02 (or any year for which the assessment is barred by limitation of time) is not declared under the scheme but is later on detected by the A.O., u/s. 197(c) of the Finance Act, such income will be deemed to be the income of the year in which notice u/ss. 148, 153A or 153C is issued by the A.O. Further, if such income is represented by an asset, Section 197(c) provides that such asset will be deemed to have been acquired in the year in which such notice is issued and tax will be payable on market value as determined under Rule 3 of IDS Rules. It may be noted that this is a dangerous provision and can be used by the Department against those who fail to take advantage of the scheme and do not declare undisclosed income or asset before 30.9.2016 under the scheme.

4. Declarant has to provide his PAN in the Form No. 1

5. No declaration under the Scheme can be made for the years in respect of which the matter is pending before the Settlement Commission.

6. If summons u/s. 131(1A) or 133(6) is issued by the A.O. for any year, the declarant can take advantage of the scheme for that year if no notice u/ss. 142/143(2)/153A/153C is issued for that year.

8.3 Circular No. 25/2016 dated 30-6-2016

1. It is clarified that the information contained in the declaration shall not be shared with any other law enforcement agency. In particular, it is clarified that:

   1. This information will not be shared with I.T. Department for any investigation.

   2. Although there is no immunity under other economic laws, this information will not be shared with Service Tax, VAT, Excise, Customs, Registrar of Companies, SEBI and other regulatory bodies.

2. Credit for TDS from undisclosed income will be allowed if it has not been claimed or allowed in any assessment made for any assessment year.

3. In Form No. 1 “Nature of Undisclosed Income” is to be stated. It is clarified that “Source of Income” is not be stated under this head. The declarant has to state the nature of the “Asset” (i.e. Jewellery, Cash, Immovable or Movable property) in which the undisclosed income is invested in this column.

4. Under Rule 3 of IDS Rules, cost of the undisclosed asset or its market value on 1.6.2016, whichever is higher, is to be disclosed.

5. If any undisclosed asset is declared by the declarant, no investigation will be initiated against the person who has sold that asset to the declarant.

6. In Answer to Q. 9 in the circular it has been clarified that any undisclosed income of earlier years should not be disclosed in the Return of Income for A.Y. 2017-18 or any subsequent year as income of that year. Adverse consequences of such action in the case of the tax-payer have been explained in this Answer.

7. If a person has utilised part of the undisclosed income for personal expenses, he should disclose the entire undisclosed income and not the balance after deducting the amount used for personal expenses.

8. If a person has invested his undisclosed income in a house property which has not been let out, he will have to declare market value of the property on 1-6-2016. He need not disclose notional rent income u/s 23(4)(b) of the Income-tax Act for the earlier years.

9. By a separate order dated 6-7-2016 the Central Government has issued a direction u/s 138 of the Income tax Act that “No public servant shall produce before any person or authority any such document or record or any information or computerized data or part thereof as comes into his possession during the discharge of official duties in respect of a valid declaration made under “ the Income Declaration Scheme, 2016”. This Notification appears to have been issued to ensure that clarification in (i) above becomes legally binding on all public servants.

8.4 Circular No:27 of 2016 dated 14-7-2016

1. It is possible for a declarant to file a revised declaration before 30-9-2016 provided that the undisclosed income in the revised declaration is not less than the undisclosed income declared in the earlier declaration filed by the declarant.

2. The declaration under the scheme in respect of cash, investment etc. will result in increase in capital in the Balance Sheet. It is clarified that such cases shall not be selected for scrutiny under the CASS only on the ground that there is increase in capital as a result of the declaration under the Scheme.

3. Under Section 190 of the Finance Act, 2016, it is provided that if an asset transferred to a Binamidar has been declared under the scheme, the declarant will get immunity only if the Binamidar transfers the property to the declarant on or before 30-9-2017. It is clarified that no capital gains tax will be payable by the Binamidar on such transfer of property to declarant and question of deduction of tax at source will not arise.

4. There was some confusion about the answer given to question No. 5 in Circular No. 25/2016 about the enquiry which the Department may make about the source of money from which tax, surcharge and penalty is paid under the scheme. It has now been clarified that the amount utilised for payment of tax, surcharge and penalty under this Scheme should be paid from declared wealth. This has been explained by an illustration as under:
   “In a case a person declares ₹ 100 lakh as undisclosed income, being the fair market value of undisclosed immovable property as on 1st June, 2016 and pays tax, surcharge and penalty of ₹ 45 lakh (₹ 30 lakh + 7.5 lakh + 7.5 lakh) on the same out of his other undisclosed income. In this case the declarant will not get any immunity under the Scheme in respect of undisclosed income of ₹ 45 lakh utilised for payment of tax, surcharge and penalty but not included in the declaration filed under the Scheme. To get immunity under the Scheme in respect of the entire undisclosed income of ₹ 145 lakh, the declarant has to declare undisclosed income of ₹ 145 lakh (₹ 100 lakh being the undisclosed income represented by immovable property and ₹ 45 lakh being the payment made from undisclosed income) and pay tax, surcharge and penalty under the Scheme amounting to ₹ 66.25 lakh i.e. 45 per cent of ₹ 145 lakh”.

5. If the declaration is made by a Company or a Firm immunity will be available to the Directors, and Partners in respect of the undisclosed income declared under the Scheme by the Company/Partnership Firm. It may, however, be noted that no immunity is provided to the Directors under the Companies Act in respect of income declared by the Company under the Scheme.

6. If a person having undisclosed income in the form of an investment in the immovable property in the name of his spouse, it is possible for the person who has made actual investment to declare the fair market value of such property on 1-6-2016 under the Scheme.

7. It is now clarified that in respect of the fair market value of the quoted shares and securities as on 1-6-2016 the quoted price of the share or security shall be computed with reference to the price quoted on the recognized stock exchange in which the highest volume of trading has been recorded as on 1-6-2016.

8. By separate press release dated 14-7-2016 the Central Government has now clarified that, although the last date for payment of tax, surcharge and penalty under the Scheme is 30-11-2016, it will be possible for the declarant to pay the amount of tax, surcharge and penalty in three instalments as under:-

1. 25% of the amount payable to be paid by 30-11-2016

2. 25% of the amount payable to be paid by 31-3-2017

3. The balance to be paid on or before 30-9-2017.

9. To sump up

1. Section 195 of the Finance Act provides that if any difficulty arises in giving effect to the provisions of the scheme, the Central Government can pass an order to remove such difficulty. Such order cannot be passed after the expiry of 2 years i.e. after 31-5-2018. Section 196 of the said Act authorises the Government to notify the Rules for carrying out the provisions of the scheme and also prescribe the Form for making the declaration under the scheme.

2. It may be noted that the Government had issued Voluntary Disclosure Schemes under the Income-tax and Wealth-tax Acts in the past. It is reported that the response to these schemes was as under:

3. After the 1997 VDIS Scheme, the matter was agitated in the Supreme Court on the question whether such VDIS Scheme is fair to honest taxpayers. At that time Government had assured the Supreme Court that in future such Schemes for voluntary disclosure will not be announced.

4. However, last year an Amnesty Scheme under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, was announced. Under this Scheme it is reported that 644 persons declared income of about ₹ 4,164 Cr., and paid tax of about ₹ 2,428.40 Cr.

5. In the Budget for 2016, in order to give one time opportunity to persons to declare undisclosed domestic income and assets, this disclosure scheme has been announced. In the Declaration Form No.1 the declarent has to specify the amount of undisclosed income, nature of the income and the year in which it was earned. He has also to give details of assets and market value of assets as on 1-6-2016, which will have to be supported by valuer’s certificate. Further, provision in the scheme that an assessee, in whose case notice u/ss. 142(1), 143(2), 148, 153A or 153C is issued for any year, and assessment is pending, cannot declare undisclosed income of that year will be a great impediment in the success of the scheme. Further, there is no immunity from proceedings under the Indirect Tax Laws, Companies Act, Stamp Act, and other Economic Laws. This will be an impediment in the success of the scheme.

6. It appears that the scheme is announced by the Government with all good intentions. It is advisable for the persons who have not complied with the provisions of the Income-tax Act should come forward and take advantage of the scheme and buy peace. Let us hope that the scheme gets adequate response.

My dear and respected fellow members in the AIFTP Family.

This is your President once again before you to say a hello to all of you.

Since the last message we have seen a lot of developments taking place on the direct taxation front and the hottest topic of today is the Income Disclosure Scheme, 2016 and its impact over the economy of the society. The contents of the scheme have been raising many eye brows across the nation in regard to legal sustainability. Many of our learned members have been on the whats up of the Federation posting their individual opinion and views which of course vary from person to person from the point of perception. Anyway there have been suggestions pouring in impelling upon the need to submit a comprehensive representation to the Finance Ministry pointing out the infirmities flowing out of the scheme. That apart, requests and suggestions are also being emanated from many quarters as to explore the possibility of a court fight on the validity in case the suggestions are not heeded to.

Of course every aspect would be examined from several points of view in consultation with all the stakeholders and ultimately a decision would be taken that would facilitate initiation of appropriate and apt action from AIFTP.

Friends, the pace of membership growth appears to be snailing in which case our target of 1,000 new members by the end of December 2016 would be failing, only to remain as a rightmare where signs for failure appear to be so, we would all work together to see that the target reaches and at times exceeds. We therefore exhort upon all the learned members of the NEC as well as the Managing Committee members from every zone to devote some kind of time for this aspect and help the organisation to reach the goal.

Many of our senior brothers have been articulating their valuable views on the Model GST Draft Bill uploaded on the portal of Ministry of Finance for public domain and we are all waiting for passage of the 122nd Constitutional Amendment Bill, 2014 pending in the Upper House of Parliament that would only pave the way for introduction of the GST in our country. we hope that as the past experience proved that every transitional change would always benefit the litigation to grow more and more and as such there is nothing to see that would worry the members of the professional fraternity as we all know that law will always be full of loose ends and lacunaes deserving filling up or plug out the loopholes by way of judicial interpretation and clarification. Therefore no member of the professional fraternity be it a legal practitioner or a tax practitioner at the grassroot level to feel any kind of disheartening or desperation on account of the GST to come, if at all if it is destined to visit the Nation, whose success or failure would always depend upon the test of the times.

We once again appeal to one and all to strengthen the hands of the Federation with many more new members and to increase the growth of the journal which is the mouth piece of the Federation on legal education.

Jai Hind

 

Dr. M. V. K. Moorthy
National President

Income Declaration Scheme 2016 and
Direct Tax Dispute Resolution Scheme, 2016 –
Assessees must take advantage of these schemes – Tax administration must
interact with tax associations/bodies and tax professionals to achieve the
desired objectives of these schemes, rather than spending honest taxpayer
money on advertisement of the schemes

The Finance Act, 2016 has introduced two schemes viz., the Income Declaration Scheme, 2016 and Direct Tax Dispute Resolution Scheme, 2016. The purpose behind introduction of these schemes is laudable. Their success depends upon the confidence that the Government is able to inspire among tax consultants who are the first points of contact for any assessee’s tax issues and grievances.

Till date, though more than 16 schemes have been introduced from time-to-time, it is for the first time that the Honourable Prime Minister of India has assured the declarant of the Income Declaration Scheme of complete confidentiality. The Honourable Finance Minister is also interacting with tax professionals and making a sincere attempt to make the schemes successful. We as tax professionals will have to play a proactive role to advise the assessees by explaining the advantages of these schemes.

One of the advantages of the Income Declaration Scheme is possible regularisation of properties in Benami name. There is no liability of interest or penalty under the direct taxes in addition to peace of mind for assessees. The Government has shown a positive mindset by issuing clarifications from time-to-time. Even for the payment of tax, installments have been granted. We hope the assessee will be able to take advantage of the schemes.

Towards better understanding of these schemes, the Federation has requested experts to share their knowledge so that the tax practitioners can advise assessees properly on these issues. The learned authors have explained the salient features of the schemes wherein they have answered 60 FAQs. All the FAQs, text of the schemes and questions and answers by the CBDT are also posted on www.itatonline.org.

I am of the opinion that spending taxpayers’ money on advertisement of these schemes may not earn the confidence of the assessees, who would rely on the advice of the tax consultants alone. If tax administration interacts with tax bodies/associations and tax professionals to spread awareness about these schemes, this would in turn go a long way in making these schemes a success.

 

 

Dr. K. Shivaram
Editor-in-Chief