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In the year Budget 2016-17, there had been a limited proposal to gather tax through Tax Compliance Window for domestic taxpayers, so that they can disclose any undeclared income of previous years. The provision known as the IDS is now a part Finance Bill, 2016. The scheme gives an opportunity to everyone for coming out with any incorrectly accrued income in the prior years, or those who did not pay tax properly in the prior years or those who have undeclared assets in any form. The scheme stayed functional for a 4-month period. The declaration was submitted from 1st June, 2016 onwards until 4 months.
What declaration does IDS handle?
Nevertheless, assets held in a foreign country and income applicable to Black Money Act, 2015 are not eligible for declaration under this scheme.
In you fail to deliver a proof of Income Tax Return of prior years under section 139 of the Income-tax Act, this income will now get declared under the new scheme.
In the situation when undisclosed income is an asset, how is the value calculated?
The person making declaration can claim an expense or income tax deduction/allowances in respect of income declared under The Income Declaration Scheme?
What is the applicable Income Tax rate on such income?
The declarant is required to pay tax, cess and penalty at these rates:
Income Tax at the rate of 30% on the declared income,
Surcharge in the form of Krishi Kalyan Cess at the rate of 25% on the taxes payable (i.e., at the rate of 7.50% of the disclosed income)
Penalty at the rate of 25% on the taxes payable (i.e., at the rate of 7.50% of the disclosed income)
So, the total applicable income tax rate is 45% of the income declared under the scheme.
What is the last date to pay the taxes?
Where to submit the declaration form?
Is it possible to submit multiple Declarations?
Is it possible to get any Refund of the Taxes paid?
Will there be any scrutiny on these declaration(s)?
Is Wealth Tax applicable on the disclosed amount?
Will there be any impact on the already filed ITRs?
Immunity from prosecution.
The complete amount of income stated under this scheme is not inclusive in the Total Income of the declarant for any assessment year under the Income Tax Act.
There is another government scheme known as the ‘direct tax dispute resolution scheme’ that has been in use since 1st June, 2016. As per this system, the declarant can make a declaration in relation to tax dues / specified tax against which some appeal is waiting before the Commissioner of Income-tax. One can recall that a similar Voluntary Disclosure Scheme was initiated back in 1997. This was a partial success and a harbinger of hope for the latest attempt at reclaiming black income.