Salient Features

THE INCOME DECLARATION SCHEME, 2016
SALIENT FEATURES

  • The Finance Minister, in his budget speech proposed 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.
  • The Income declaration scheme, 2016 is one of the schemes introduced by the Finance Bill 2016.
  • The scheme provides for declaration by any person of his undisclosed income by paying tax at 30 %, surcharge at 7.5% and penalty at 7.5% which is a total of 45% of the undisclosed income.
  • The surcharge levied at 7.5% of undisclosed income will be called Krishi Kalyan surcharge to be used for agriculture and rural economy.
  • A declaration under the scheme may be made in respect of any undisclosed income (i.e. any income chargeable to Income-tax in respect of undisclosed income of any financial year upto 2015-16 for which the declarant had, either failed to furnish a return u/s 139 of the Income-tax Act, or failed to disclose such income in a return furnished before the date of commencement of the scheme or such income had escaped assessment by reason of the omission or failure on the part of such person to make a return under the Income-tax Act or to disclose fully and truly all material facts necessary for the assessment or otherwise.)
  • Any income in the Form of Investment in any asset located in India may be declared under the Scheme provided such asset is acquired from such undisclosed income. In such cases, the fair market value of such asset as on 1.06.2016 computed in accordance with Rule 3 of the Income Declaration Scheme Rules, 2016 shall be deemed to be 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 provided subject to certain conditions.
  • The scheme shall remain in force for a period of four months from 1st June 2016 and remain open till 30th September 2016.
  • The declaration under the scheme shall be made in Form 1 as prescribed under Rule 4 of the Income Declaration Scheme Rules, 2016.
  • The declaration shall be furnished:
    • Electronically under digital signature
    • Through transmission of data in the form electronically under electronic verification code; or
    • in print form, to the concerned Principal Commissioner or the Commissioner who has the jurisdiction over the declarant.
  • After such declaration has been furnished, the jurisdictional Principal CIT/CIT will issue an acknowledgement in Form 2 to the declarant within 15 days from the end of the month in which declaration under Form 1 is made.
  • The declarant shall furnish proof of payment made in respect of tax, surcharge and penalty to the jurisdictional Principal CIT/CIT in Form 3 after which the said authority shall issue a certificate in Form 4 of the accepted declaration within 15 days of submission of proof of payment of tax, surcharge and penalty by the declarant.
  • As per the provisions of the Scheme, no declaration can be made in respect of any undisclosed income chargeable to tax under the Income-tax Act for assessment year 2016-17 or any earlier assessment year in the following cases:
    • where a notice under section 142 or section 143(2) or section 148 or section 153A or section 153C of the Income-tax Act has been issued in respect of such assessment year and the proceeding is pending before the Assessing Officer;
    • where a search has been conducted under section 132 or requisition has been made under section 132A or a survey has been carried out under section 133A of the Income-tax Act in a previous year and a notice under section 143(2) for the assessment year relevant to such previous year or a notice under section 153A or under section 153C of the said Act 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;
    • where any information has been received by the competent authority under an agreement entered into by the Central Government under section 90 or section 90A of the Income-tax Act in respect of such undisclosed asset.
    • 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.
  • The following person shall also not be eligible for making a declaration under the scheme:
    • A person in respect of whom an order of detention has been made under the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974 subject to the conditions specified in the Scheme.
    • A person in respect of whom proceedings for 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 are pending;
    • any person notified under section 3 of the Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992
  • A declaration shall be void and shall be deemed to have never been made if:
    • The declarant fails to pay tax, surcharge and penalty before 30th November, 2016
    • Where the declaration is made by misrepresentation or suppression of facts of information.
  • An invalid declaration would invite stringent consequences of penalty and prosecution under the Act, in addition to taxes and any taxes paid under the scheme becomes non-refundable.
  • Where a valid declaration has been made, the following consequences will follow:
    • The amount of undisclosed income declared shall not be included in the total income of the declarant for any assessment year under the Income-tax Act;
    • Nothing contained in any declaration shall be admissible in evidence against the declarant for the purpose of any proceeding relating to imposition of penalty or for the purposes of prosecution under the Income-tax Act or the Wealth-tax Act, 1957;
    • Immunity from the Benami Transactions (Prohibition) Act, 1988 shall be available in respect of the assets disclosed in the declarations subject to the condition that the benamidar shall transfer to the declarant or his legal representative the asset in respect of which the declaration of undisclosed income is made on or before 30th September, 2017;
    • The value of asset declared in the declaration shall not be chargeable to wealth-tax for any assessment year or years.
    • Declaration of undisclosed income will not affect the finality of completed assessments. A declarant under this Scheme shall not be entitled, in respect of undisclosed income declared or any amount of tax and surcharge paid thereon, to re-open any assessment or reassessment made under the Income-tax Act or the Wealth-tax Act, 1957 or claim any set off or relief in any appeal, reference or other proceeding in relation to any such assessment or reassessment.