Income Declaration Scheme 2016 What, why, who, when and how
What and why the scheme is all about The government is moving towards lower tax rate regime with a non litigious approach. So resultantly the government is going to be extra tough on black money hoarders. Strict penalties and prosecution awaits the evaders. Before going whole hog after the evaders government is providing one last opportunity for such persons to come clean. In the words of the FM DzIt is an opportunity for the earlier non-compliant to move to the category of complaint.dz After this window, the FM said Dzwe would then like to focus all our resources for bringing people with black money to books.dz
Statutory provisions Chapter IX of Finance Act, 2016 Section 181 to 199 of the Finance Act, 2016 IDS Rules 2016 : Rule 1 to 4 Form of declaration is form 1 for declaration made u/s 183. Acknowledgement will be issued in form 2 by Pr. CIT. Proof of payment of tax to be furnished in form 3. Certificate of declaration in form 4 by Pr. CIT
Who can take benefit of this scheme Any taxpayer (All types of persons) can make declaration for any assessment year before AY 2017-18 in respect to any income chargeable to tax In respect of which she/he/it has failed to furnish a return u/s 139 or filed return but failed to disclose it in the return or due to omission/failure/non disclosure of material facts it escaped assessment.
Who cannot apply for the scheme A person against whom order of detention has been made under CoFEPoSA. (with some conditions) In relation to prosecution for offence under IPC (Chapter IX/XVII), NDPSA, UAPA, PCA Person notified u/s 3 of special court act (offences relating to transactions in securities) In relation to undisclosed foreign income/asset which is chargeable to tax under Black Money and Imposition of tax act Where notice u/s 142, 143(2), 148, 153A, 153C has been issued and proceeding is pending (served on assessee by 31st of May, 2016) or search conducted u/s 132, requisition made u/s 132A, survey carried out u/s 133A, and a notice u/s 143(2), 153A, 153C has not been issued though time limit for such issuance has not expired. Information has been received from competent authority u/s 90, 90A
When of the scheme Window for making declaration from 1st of June 2016 till 30th of September, 2016. Payment of all tax dues to be made within 2 months of declaration or latest by 30th of November, 2016 Issuance of acknowledgement in form 2 within 15 days from the end of month of filing declaration. Issuance of form 4 within 15 days of submitting of proof of payment.
How of the scheme Tax rate will be flat 30% of income disclosed. Cess of 7.5% (Krishi Kalyan Cess) and penalty of 7.5% Total Dues Tax Cess Penalty
Form 1 Can be filled online or submitted in paper form before the jurisdictional Pr. CIT. Valid DSC/e-verification is needed for efiling. A valid XML file should be generated using the JAVA Utility available under downloads on efiling site. The JAVA utility of Form for Income Disclosure - Form 1 can be downloaded from the path Downloads > Forms (Other than ITR) > Form for Income Disclosure - Form 1. After login, go to efile>upload form 1 (last option) Detailed manual available online. One declaration per assessee is allowed.
Determination of disclosed income Only income is to be disclosed, no expenditure/allowance shall be allowed. Income can be in the form of money or investment in assets. As per Rule 3, IDS rules, value of assets will be taken at cost of acquisition or FMV on 1st June, 2016, whichever is higher. For determining FMV, Valuation by a registered value. Refer rule 3 for detailed procedure.
Benefits Immunity from penalty/prosecution proceedings under IT Act/WT Act relating to declaration made at very reasonable rate of tax. Declared income not to be included in the income for any AY, neither considered for WT purposes. For future sale of declared asset, cost of acquisition to be taken as the declared FMV and period of holding shall start from 01st of June, 2016. Declaration not to affect finality of completed assessment.
Benefits Immunity from Benami Transactions (Prohibition) Act if benamidar transfers property to declarant before 30th September, 2017. Declaration to remain confidential u/s 138 of IT Act. If declaration was in good faith found ineligible u/s 196, then assessed as per normal provisions of IT Act (Except for PoCA). No enquiry of declaration made.
Notables Payment made under the scheme not refundable. If payment not made within time then declaration void ab initio. Declaration made by misrepresentation/suppression of facts, then void ab initio. Income assessed earlier, appeal pending: Declaration not allowed. However in respect of not assessed income it will be allowed. Re-assessment 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, not allowed.
Dangers of not making declaration 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 section 142/143(2)/148/153A/153C is issued by the Assessing Officer and the provisions of the Income-tax Act shall apply accordingly.
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