Income disclosure scheme- An overview

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A.Y. 2016 – 2017
INCOME DISCLOURE SCHEME
CA PRACHI PAREKH
caprachiparekh@gmail.com

Background…
- Population of our country: 125 crores
- Only 1,50,000 people whose taxable income is >
50 lakhs
- Skewed Statistics
- Efforts for taxing the black money

Publicity
• Pm’s mann ki baat : coaxing & threatening at the
same time
• Urges people to be a part of the “transparent”
system
• Warns of difficulties if one having such income
does not take benefit of IDS

Department ki “marketing”
• Department has conducted seminars for creating
awareness about the scheme
• Mentions undisclosed income to be a “time
bomb” waiting to be diffused
• Efforts at bringing domestic black money in ambit
of tax

Scheme in brief:
• Scheme is w.e.f 01.06.2016, end date to make a
declaration is 30.09.2016
• Rate of tax – 30%, Surcharge – 25%, penalty -25%
• As per scheme, declarant to pay tax @45% on
undisclosed income

Scheme in brief:
• Declaration to be made in form 1
• Prin CIT / CIT to acknowledge in form 2 within 15
days from end of month in which declaration is
made
• Proof of payment by declarant in Form 3
• Authority to issue a certificate in Form 4, within 15
days of submission of proof of payment

Scheme in brief:
• Ineligible declaration:-
- If notice u/s 142 / 143(2)/148/ 153A or 153C has
been issued before 31.05.16
- Search / survey cases
- Cases covered under Black Money Act
- Issues covered under other Acts

Scheme in Brief:
• Instances when declaration shall be invalid:
- Failure to pay the tax & penalty by 30.11.16
- Declaration has been made by suppression or
misrepresentation of facts

Benefits :
• “NO QUESTIONS ASKED”
• Undisclosed income not to be included in TI for
any AY
• Declaration to be valid evidence for proceedings
under the Income Tax Act
• Immunity from Wealth Tax Act
• Declaration not to affect finality of completed
assessments

Sawalon k jawab, ya naye sawal:
• Subsequent transfer of capital asset disclosed
under the scheme : POH will be counted from date
of disclosure
• Part income not disclosed under any earlier search
/ survey cases – can be disclosed under the
scheme

• Income declared, but found to be ineligible: to be
assessed under normal provisions of the Act.
• Part payment of taxes + penalty = declaration
invalid
• Business Reorganisations: Declaration is to be
made in name of new entity

• Scheme NA for applicants where proceeding is
pending with Settlement Commission
• Information not to be shared with other law
enforcement agencies

Some Maths:
• Various calculations, stating effective rate of tax =
31%
• FAQ no.5 , Circular No. 25/2016, dated 30-6-2016
• Interpretation ambigiuous

IDS- from the Rules
• Registered Valuer: person so regtd under section
34AB of the Wealt tax Act
• Valuation rules – somewhat similar to Rule 11UA
for valuation of gifts in kind being immovable or
movable property
• Unquoted equity shares: value derived from
formula using BV of A&L on 01.06/2016

IDS – from the Rules
• For valuation of unquoted share or security, Other
than equity share:
- COA or FMV on 01.04.16, basis valuation report of
“registered valuer”
- If one looks at qualifications of “registered valuer”
under Rule 8A of Wealth Tax Act,
- One wonders if it should have been “Merchant
Banker”

IDS – from the Rules
• Investment in asset from income which was partly
disclosed – Proportionate amount to be included
• Procedures / formats / standards for ensuring
secure capture & transmission of data ??

“ We have what it takes, to take what you have” is
probably the sentiment
Wonder what is in store post 30.09.16. once the
time limit for IDS ends

• For clarification of any queries on the IDS and
interpretational issues, please contact:
caprachiparekh@gmail.com

Income disclosure scheme- An overview

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