Incase you have not filed your tax returns or have not fully disclosed your taxable income or investments either due to ignorance, negligence or intentionally or you have anxieties about results of your tax appeals, you need not have sleepless nights.
The Government of India through the Finance Act, 2016 has provided windows for declaration of past undisclosed income and settlement of pending appeals under direct and indirect taxes. These are one-time schemes limited for a short period beginning June 1, 2016 and offers good opportunity to defaulting tax payers to clean up their past acts and make a fresh beginning without worries and anxieties of being caught through web-net.
Tax department has huge data mine of your financial, investment and property transactions, lavish expenditure on celebrations, foreign travels and other high value transactions. All that is required is declaration of past undisclosed income and payment of tax along with nominal penalty totally amounting to 45% of the declared income. Under the Dispute Resolution Schemes, taxpayers can settle pending disputes which have resulted from normal assessments or due to retrospective amendments to the Act with substantial relief.
The Income Declaration Scheme 2016
The scheme provides for declaration by any taxpayer like individuals, firms, companies, etc. of their undisclosed income by paying tax, surcharge and penalty on such declared income.
The scheme has come into force from June 1, 2016 and will remain open till September 30, 2016. The scheme is applicable in respect of undisclosed income of any financial year upto 2015-16. The total amount payable is 45% of declared income comprising of 30% tax, 7.5% surcharge and 7.5% penalty on declared income.
The salient features of this scheme are as under.
a) Any person can make declaration in respect of any income chargeable to tax up to AY 2016-17:
i. If they have failed to furnish tax returns though they are chargeable to tax.
ii. If they have failed to disclose any income which was chargeable to tax in the returns of income already furnished before May 30, 2016.
iii. In case any income has escaped assessment on account of any omission or failure to disclose, fully and truly, necessary facts at the time of assessment.
b) No deduction is available in respect of any expenditure or allowance in respect of such income declared.
c) This scheme is not available if you have received any notices or if there are any pending matters before tax authorities for undisclosed income or search or survey is conducted or information is received from foreign countries for undisclosed assets or for cases covered under Foreign Black Money Act or under Narcotics, Drugs and Corruption.
d) For the purpose of disclosure of assets or investment, fair market value of such assets as on June 1, 2016 is deemed to be the undisclosed income. In view of this, appreciation in value of assets from the date of purchase till the date of commencement of the scheme, though unrealised, will be taxed under this scheme.
e) Payment of tax on declared amount should be made before November 30 and proof of payment should be filed with the Commissioner of Income Tax. Failure to pay tax will make the declaration invalid.
f) The persons making declarations are granted immunity from payment of wealth tax and such declaration will not be used as evidence under any other law.
For declaration, there is normally no need to go beyond six years even if income or investment has remained undisclosed for any reason, since proceedings are time barred u/s 149 of the Income Tax Act.
This is a good opportunity for the non filers and persons with unaccounted income and investment to come forward and get their matters cleared up by paying moderate amount of tax.
The Direct Tax Dispute Resolution Scheme 2016
This scheme is introduced to reduce huge backlog of cases and to recover pending dues expeditiously. Large numbers of appeals are pending before Appellate Authorities in respect of payment of tax, interest and penalties. This scheme will also be operational form June 1, 2016 to September 30, 2016 to resolve disputes. Under this Scheme two types of disputes can be resolved:
i. “Tax arrears” under Income Tax Act or Wealth Tax Act in respect of which appeals against assessment order or penalty order are pending before Commissioner of Income Tax (Appeals) as on 29 February 2016.
ii. “Specified Tax” by way of demand arising on account of retrospective amendments made in the Act.
iii. Any matter pending before Income Tax Tribunals, High court and Supreme Court are not covered under this Scheme.
In case of “Tax Arrears”, if disputed tax amount is less than Rs 10 lakh, tax payable is at applicable rates plus interest upto the date of assessment without any penalty.
In case disputed tax exceeds Rs 10 lakh, tax at applicable rates, interest upto the date of assessments and penalty at 25% of the minimum amount of penalty is payable. In case of pending appeals against penalty order, 25% of the minimum amount of penalty is payable.
In case of “specified tax” on account of retrospective amendment in the Act, only tax at applicable rates is payable without any interest and penalty. This is done to cover Vodaphone type cases. Declaration is to be made before Commissioner of Income Tax. On payment of the amount, the pending appeals stand withdrawn. This Scheme is not available for tax arrears arising from search & survey cases, drugs, narcotics and foreign income.
The Indirect Tax Dispute Resolution Scheme 2016
This scheme covers dispute pending before the Commissioner (Appeals) as on day 1 of March 2016 under Customs, Central Excise and Service tax and is open from Day 1 of June 2016 to December 31, 2016.
Under this scheme pending disputes can be settled by making declaration before the designated authority by paying tax amount due along with applicable interest and penalty of 25% of the amount imposed in the order. Disputes arising from search and surveys, narcotics, drugs, conservation of foreign exchange and prevention of smuggling are not covered.
It is advisable for defaulting tax-payers to take benefit of these Schemes to come out clean to have peaceful sleep.
Government of India is serious about unearthing black money to make India tax compliant.
