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THE INCOME DECLARATION SCHEME, 2016
- 1. THE INCOME DECLARATIONSCHEME, 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 DECLARATIONSCHEME, 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 DECLARATIONSCHEME, 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 DECLARATIONSCHEME, 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 DECLARATIONSCHEME, 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.