The Income Declaration Scheme, 2016 provides an opportunity for taxpayers to declare undisclosed income and pay tax, surcharge, and penalty at 45% to obtain immunity from prosecution. The key aspects of the scheme are: 1) Declarations can be made from June 1, 2016 to September 30, 2016 and tax dues must be paid within 2 months of declaration or by November 30, 2016. 2) The tax rate on undisclosed income is 30% plus surcharge of 25% and penalty of 25%, amounting to an effective tax rate of 45%. 3) Immunity from prosecution under the Income Tax Act and Wealth Tax Act is provided if tax is fully paid under the scheme.

1. THE INCOME DECLARATION SCHEME, 2016
1) Timeline Declarations for undisclosed
income
From June 1st
, 2016 to
September 30th
, 2016
Payment of dues on the
undisclosed income
Earlier of:
• Within 2 months of
declaration; or
• Latest by November
30th
, 2016.
2) Definitions Declarant Person making the declaration under this
scheme. (Assesse or his authorized
representative as the case may be.)
Other words
not defined
As per the relevant definitions of the applicable
Acts.
3) Declaration of
undisclosed income
Declaration to be filed for any income chargeable to tax under the
Income Tax Act, 1961 as per the Timeline as stated above for any
Assessment Year prior to the Assessment year being A/Y 2017-2018:
• Assessee has failed to file ITR u/s 139.
• Income not disclosed in the ITR before commencement of
this scheme.
• Income has escaped assessment or all material facts have not
been disclosed and this is because of the mistake
attributable to assessee.
• Unexplained assets or investments attributable to
undisclosed income shall be valued on the FMV prevailing on
the date June 1st
, 2016.
• FMV of any asset to be determined in such manner as may
be prescribed.
• No deductions or allowances are to be claimed on the
incomes disclosed as per this scheme.
4) Charge of tax and
surcharge
Overruling the Income Tax Act or any Finance Act:
a. Declared undisclosed
income
30%
b. Surcharge on (a) (KKC) 25%
c. Penalty on (a) 25%
d. EFFECTIVE RATE 45%
5) Manner of declaration Competent Authority Principal CIT or CIT
Person authorized to sign the
declaration
In the same manner the return
of income (ITR) is
signed/authenticated by the
assessee as stipulated by the
provisons of the Income Tax Act.
Restrictions • One declaration per
assessee.
• Any other declaration
under this scheme shall
be void.
6) Time for payment of
tax
Tax dues as per this scheme to be paid as per the timeline stated
above.

2. THE INCOME DECLARATION SCHEME, 2016
Proof of such payments to be filed with the Competent Authority.
Any failure to pay the tax dues as per the declaration made as per
the time specified will deem that the declaration was not filed at all.
7) Undisclosed income
declared not to be
included in total
income
Income declared as per the provisions of this scheme shall not be
included in the total income of the assessee for any Assessment Year
for which he has paid the dues as per point 4).
8) Undisclosed income
declared not to affect
finality of completed
assessments
The declarations under this scheme and the assessments under the
Income Tax Act, 1961 are mutually exclusive and declarations made
under this scheme are to be dealt with as a separate issue not in
consonance with the Act.
9) Undisclosed income
declared not to be
treated as benami
transactions in certain
cases
The provisions of the BENAMI TRANSACTIONS(PROHIBITION) ACT,
1988 shall not apply in respect of the declarations of undisclosed
income made in the form of investment in any asset, if the asset
existing in the name of a benamidar is transferred to the declarant,
being the person who provides the consideration for such asset, or
his legal representative, within the period notified by the CG.
10) Tax in respect of
voluntarily disclosed
income not refundable
Any payment of dues as per point 4) shall be non-refundable. (Any
excess payments shall not be refunded back to the declarant. In
simple words any amount paid as dues under this scheme shall not
be refundable in any case.)
11) Declaration not
admissible in evidence
against declaration
Any disclosures made under this scheme shall not qualify to be
admissible evidence(s) in any law in force for the purpose of:
• Penalty imposition proceedings (except under this scheme)
• Prosecution under the Income Tax Act, 1961 or Wealth Tax
Act, 1957
Note: This point is notwithstanding anything contained in any law for
the time being in force.
12) Declaration by
misrepresentation of
facts to be void
Any declaration made under this scheme by
misrepresentation/suppression of facts shall render this declaration
to be void and it shall be deemed that the declaration was never
made.
13) Exemption from
Wealth Tax in respect
of assets specified in
declaration
First Clause: In respect of undisclosed income represented by
cash(including bank deposits), investments or in any assets as
specified in the declaration:
• Assessee has failed to file a return of net wealth under the
Wealth Tax Act by April 1st
, 2015; or
• Such have not been disclosed in the returns for the said
assessment year(s); or
• Value of such assets has been underreported in the return of
net wealth,
Second Clause: Then overruling the Wealth Tax Act and its bye-laws:
No wealth tax shall be paid for such assessment year(s).
Such assets shall not be included in the net wealth of the
assessee in these years.
The amount of undervaluation of such assets if exceeds the

3. THE INCOME DECLARATION SCHEME, 2016
amount disclosed(for acquiring such assets) as per the
scheme by the declarant shall be taken into account in
computing the net wealth of the declarant for the said
Assessment Year(s).
Above points shall not be applicable as for computing the net
wealth or interests of partners in the firm if, the declarant is a
firm.
Note: First Clause not to apply unless point 6) is fully satisfied.
14) Applicability of certain
provisions of Income
Tax and Chapter V of
Wealth Tax
The provisions of Chapter XV of the Income Tax Act relating
to liability in special cases and of section 189 of that Act or
Provisions of Chapter V of Wealth Tax Act relating to
liability in respect of assessment in special cases
Shall apply mutatis mutandis as they apply in relation to proceedings
under the Acts mentioned herein.
15) Scheme not to apply to
certain persons
The following persons are not qualified to make a declaration under
this scheme: (Extract from the bill)
a. A person on whom an order of detention has been made
under the Conservation of Foreign Exchange and Prevention
of Smuggling Activities Act, 1974, provided that:
such order of detention, being an order to which the provisions of section
9 or section 12A of the said Act do not apply, has not been revoked on the
report of the Advisory Board under section 8 of the said Act or before the
receipt of the report of the Advisory Board; or
such order of detention, being an order to which the provisions of section
9 of the said Act apply, has not been revoked before the expiry of the time
for, or on the basis of, the review under sub-section (3) of section 9, or on
the report of the Advisory Board under section 8, read with sub-section
(2) of section 9 of the said Act; or
such order of detention, being an order to which the provisions of section
12A of the said Act apply, has not been revoked before the expiry of the
time for, or on the basis of, the first review under sub-section (3) of that
section, or on the basis of the report of the Advisory Board under section 8,
read with sub-section (6) of section 12A, of the said Act; or
such order of detention has not been set aside by a court of competent
jurisdiction.
b. in relation to prosecution for any 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;
c. to any person notified under section 3 of the Special Court
(Trial of Offences Relating to Transactions in Securities) Act,
1992;
d. 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;
e. In relation to any undisclosed income chargeable under the
Income Tax Act for any Asssessment Year prior to
Assessment Year 2017-2018:
Where notices under the following have been issued under the Income
Tax Act in respect of such Assessment Year and the proceeding is pending
before the AO:
o Notice u/s 142; or
o SCN for Scruitny Assessment/Reassessment; or

4. THE INCOME DECLARATION SCHEME, 2016
o Notice for income escaping assessments.
A few more cases(Income Tax Act, 1961):
o A search has been conducted; or
o Requisition has been made; or
o Survey has been carried out in a Previous Year and a SCN for Scruitny
Assessment/Reassessment has been issued relevant to such Previous
Year; or
o Notices u/s 153A or 153C for an Assessment Year relevant to any
previous year prior to such previous year has not been issued and the
time for issuance of such notice has not expired; or
Where owing to DTAA or TIEA entered by the Government with other
Countries or Territories, any information has been received by the
competent authority in respect of such undisclosed asset.
16) Removal of doubts Benefits, concessions or immunity under this scheme shall be
available only to the declarant.
If the dues as stipulated as per the provisions of this scheme are not
paid within the timeline then the undisclosed income so declared
shall be taxable as per the provisions under the Income Tax Act,
1961.
Where any income has accrued/received/arisen as the case may be
or any asset is acquired thereof prior to commencement of this
scheme for which the assessee has not made any declaration under
this scheme, then it shall be deemed that such event has taken place
in the year in which a notice under the following sections is issued by
the AO and the provisions of the Act shall apply accordingly:
Notice u/s 142;
SCN for scrutiny assessment/reassessment;
Notice for income escaping assessments;
Notice u/s 153A or 153C.
17) Power to remove
difficulties
CG may by notification in Official Gazette make rules for carrying out
the provisions of the Act.
18) Power to make rules CG may by notification in Official Gazette not inconsistent make rules
to remove the difficulty.

5. THE INCOME DECLARATION SCHEME, 2016
Why is the Income Declaration Scheme introduced?
(Relevant extract from the Finance Minister’s Budget Speech, 2016)
CLEARING THE AIR:
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.
LAST CHANCE FOR THE BLACK MONEY HOLDERS TO COME CLEAN:
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. 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.
THE COMMITMENT:
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.
NON-APPLICABILITY OF THE SCHEME IN CERTAIN CASES: (Extract from the Memorndum explaining the
Finance Bill, 2016)
where notices have been issued under section 142(1) or 143(2) or 148 or 153A or 153C, or
where a search or survey has been conducted and the time for issuance of notice under the relevant provisions of
the Act has not expired, or
where information is received under an agreement with foreign countries regarding such income,
cases covered under the Black Money Act, 2015, or
persons notified under Special Court Act, 1992, or
cases covered under Indian Penal Code, the Narcotic Drugs and Psychotropic Substances Act, 1985, the
Unlawful Activities (Prevention) Act, 1967, the Prevention of Corruption Act, 1988.
IMPORTANT: RECENT AMENDMENTS TO THE FINANCE BILL 2016:
Now, the bill passed by Lok Sabha also made referencing to section 119 (Instruction to
subordinate authorities) and section 138 (Disclosure if information respecting taxpayer) to
the Scheme.