What is Income Declaration Scheme 2016 1

The Finance bill, 2016 introduced a scheme Income Declaration Scheme, provides an opportunity to persons who have failed to pay taxes from beginning to till date and pay tax, surcharge and penalty.

Total amount to be paid for disclosing of undisclosed income will be

TAX30%, KRISHI KALYAN SURCHARGE25% OF TAX, PENALITY25% OF TAX

So

Tax30%
Krishi kalyan surcharge 7.5%
Penalty7.5%
Total45%

 

Income Declaration Scheme 2016

  • This shall remain in force from 1st June 2016 to 30th September 2016 for filling of declarations and payments of taxes, penalty and surcharge maximum up to date of 30th November 2016, declaration can be filled online or with the principal commissioner or commissioner of that jurisdiction.
  • Assets specified shall be exempt from wealth tax.

Here specified assets are Urban Land, Motor Cars, Cash in Hand, Yachts, boats and aircrafts, jewellery & Bullion and Building & Land appurtenant thereto

  • No enquiry under income tax and wealth tax shall be taken in respect of such declarations.
  • Immunity from prosecution under income tax, wealth tax act is also provided along with immunity from Benami transactions Act,1988

(Benami transaction (prohibition) Act, 1988: An act to prohibit benami transactions and right to recover property held benami for matters connected therewith or incidental thereto)

Here “Benami transaction” means any transaction in which property is transferred to one person paid or provided to another person.

  • Declaration become void, in case of non-payment of total taxes, surcharge, and penalty.
  • The circumstances in which declaration in the form of INVESTMENT in Assets, FMV of such assets as on 1st June 2016 shall deemed to be undisclosed income under this Scheme.(However in case of foreign assets or Income to which Black Money Act, 2015 applies shall not be eligible for declaration)
  • This undisclosed Income shall not be included in the Total Income of the declarant under the provision of the act for any Assessment year.

 

NON APPLICABILITY

  1. In relation to prosecution for any offence punishable under Chapter IX or Chapter XVII of Indian Penal Code, The narcotics drugs and psychotropic substance Act1985, The unlawful activities (prevention) Act,1967 and prevention of corruption Act,1988
  2. Trail of offences relating to transactions in The Securities Act, 1992
  3. In relation to undisclosed foreign income and assets which is chargeable to tax under “The black Money (undisclosed foreign Income and Assets) and Imposition of Tax Act, 2015
  4. To any person in respect of whom an order of detention has been made under the conversion of Foreign Exchange & Prevention of smuggling Act.
  5. In relation to any undisclosed income chargeable to tax under the Income tax for any previous year relevant to an assessment year prior to the assessment year 2017-18
  • Where a notice of Income Tax Act has been issued in respect of such Assessment year and proceeding is pending before AO ( Notice under sections 142, 143(2), 148, 153A or 153C)
  • Where any search u/s132, requisition u/s132A or survey u/s133A and notice u/s 143(2), 153A or 153C has been issued
  • Where information has been received by competent authority under an agreement u/s90 and 90A

MANNER of DECLARATION OF UNDECLARED INCOME

CLAUSE 183 of the Income Declaration Scheme provides that declaration shall be made online or with the principal commissioner or commissioner in such Form as mentioned.

The declaration shall be duly signed by

  1. In case of Individual, by Individual himself; where such individual outside India then Authorized person on his behalf, in case of incapacity guardian of such Individual
  2. In HUF, by karta; in case karta his absent from India or incapacity then by any Adult member of such family
  • In company, MD and if Managing Director is unable to sign then by any Director
  1. In case of Firm, by managing partner and if Managing partner is unable to sign by any reason then by any partner, not being minor.
  2. Any other Association, by any member or principal officer thereof
  3. Any person making a declaration in respect of his Income or as a representative in respect of income of any person shall not make declaration. Any declaration shall be void

 

Payment of Tax, surcharge, and penalty

The declarant shall file proof of payment of the same on or before the date notified to commissioner or principal commissioner.

If the declarant fails to file declaration then shall deemed never filled under this declaration scheme.

Void declaration

However declaration made in suppression or mis-statement of facts, such declaration shall be void and deemed to be never made.

Power of Central Government

Central government has power to remove difficulties then the Central Government by an order, not inconsistent with the scheme but not after the expiry of 2years.

Central government has power to make rule in respect of declaration scheme

Effective Rate

  • As per recent circular, they may only need to pay an effective tax of 31% against 45% stipulated in the Income Declaration Scheme, 2016
  • This is become where the tax amount is coming from.
  • This has emerged in a clarification issued on 30th June and tax department will not make any enquiry on the declaration “source of Income, payment of tax, surcharge & penalty.

 Example

·  Undisclosed Income     Rs.100Crore
·  Tax                                  Rs.45Crore

Remaining Rs. 55Crore would be treated as legitimate income.

However, if no questions are asked about the source of income from which the tax is paid, the declarent can disclose Rs. 100Crore as tax from another source, in effect the undisclosed income work out to be Rs. 45Crore as tax from another source.