What is the Income Declaration Scheme, 2016?
Black money voluntary disclosure schemes and amnesty schemes for tax evaders wanting to come clean are not new to India. Till the 1990s, black money and tax evasion were largely considered taboo; but with the Voluntary Disclosure of Income Scheme (VDIS) floated by the then Finance Minister P Chidambaram, between June and December 1997, amnesty and tax evasion followed by disclosure has become the norm rather than the exception. This year again, the Narendra Modi led NDA government has launched an Income Declaration Scheme (IDS) 2016. The scheme has been effective from 1 June, 2016 and is now nearing closure (ends on 30 September, 2016). According to the terms of this IDS 2016, any income tax assessee may file returns for assets or income that had not been disclosed in the ITR of previous years. This means that the taxpayer may disclose all income that has remained undisclosed hitherto and thereby regularize their wealth. The NDA government, Finance Minister Arun Jaitley, in particular, has been rather stringent when it comes to tax evasions and wealth stashed away overseas. In the Union Budget 2016, FM Jaitley announced that a 4 month long amnesty scheme would be given to domestic tax evaders and black money holders. Those who come clean will not be prosecuted but will be required to pay the tax applicable on the income, a penalty and cess. The total tax thus levied adds up to about 45 percent of the income disclosed under the IDS 2016.Highlights of the IDS 2016
- The Income Declaration Scheme 2016 aims to bring in any income undisclosed by taxpayers in previous years under the tax system thus curbing black money and tax evasion in the country.
- The asset or income disclosed under the IDS 2016 should have been taxable in any assessment year prior to the current (2017-18).
- A person coming forward and declaring such income or assets hitherto undisclosed shall be provided immunity from prosecution or penalty under the Wealth Tax Act of 1957, the Income Tax Act of 1961, and the Benami Transactions (Prohibition) Act, 1988.
- The person making use of the IDS to declare income or assets will be required to pay tax amounting to 30 percent of the value of the undisclosed income. In addition to this, the person will have to pay a surcharge of 25 percent. Apart from this a penalty of 25 percent of the tax amount will also be levied. This makes the total payment about 45 percent of the undisclosed income.
- If, however, the declarant is found to have paid this 45 percent tax, penalty, and surcharge payment from any other undisclosed income, he/she will not be given any immunity.
- Initially, the government had announced that the IDS declaration must come in by 30 September, 2016 and the entire payment of the tax, interest, and penalty must be deposited by 30 November, 2016. A few days ago, however, the government has decided to provide an extension of deadline on the payment. While the declaration date still remains end September 2016, the payment of tax, surcharge, and penalty may be made in a staggered fashion. Now, a minimum payment of 25 percent of the amount payable must be made before 30 November, 2016. Another installment of 25 percent must be made by 31 March, 2017. The remaining amount must be paid by 30 September, 2017, giving declarants an entire year to come up with the amount.
