income declaration scheme
TRANSCRIPT
Pros & Cons
Of
INCOME DECLARATION SCHEME, 2016
By:Direct Tax VerticalAsija & AssociatesChartered Accountants
Presentation on
Your undisclosed income is a TIME BOMB,
Defuse the tension!!!Let’s gain an insight on
Income Declaration Scheme, [email protected]
Coverage1. What is IDS?
2. Which income can be disclosed?
3. What is the amount payable by declarant ?
4. Benefits of Declaration !!!
5. Who can make the declaration?
6. Who cannot make the declaration?
7. Process of making [email protected]
Coverage8. Critical Dates
9. What could make the declaration void ?
10.Risk of doing Income declaration under IDS
11.What if you don’t opt for IDS?
12.Tax on Non Disclosure v/s IDS
13.Some Critical queries / FAQ’s
14.Benami [email protected]
Coverage15.Tax impact on Benami Transactions
16.Disclosure of Capital Assets
17.Tax impact on disclosure of Capital Assets
1-What is IDS?
Government of India has enacted a scheme,where by an opportunity has been given to theassesse to voluntarily declare his incomewhich he has not disclosed in the past.
This Scheme is called Income DeclarationScheme, 2016. (IDS 2016)
2.Which Income can be Disclosed ?
The declaration shall be made in respect of theincome chargeable to Tax :-
For which he has Failed to file his return ofincome or
For which he has Failed to disclose in hisreturn of income
Which has escaped assessment by reason ofomission or failure to disclose all materialfacts.
The undisclosed income should be for anyassessment year, prior to AY 2016-17.
1. Tax @ 30% of undisclosed income
2. Surcharge Krishi Kalyan Cess @ 7.5% ofundisclosed income
3. Penalty @ 7.5% of undisclosed income
TOTAL: 45% OF UNDISCLOSED INCOMEDECLARED
3-Amount payable by declarant
4-Benefits of Declaration Amount of undisclosed income declared shall
not be included in the total income for anyAssessment Year, for the purpose of Income TaxAct (ONLY).
Immunity from prosecution under IncomeTax Act and Wealth Tax Act. (ONLY)
Immunity from penalty under any otherlaws too.
No scrutiny or enquiry under Income-tax Actand Wealth Tax Act in respect of the incomedeclared under this scheme.
We need not explain the source ofundisclosed income. [email protected]
No Wealth Tax shall be paid in respect of suchdisclosure.
Immunity from Benami Transactions(Prohibition) Act, subject to transfer of assetsby the benamidar to the real owner before30.09.2017
No entitlement to Income Tax Departmentto re-open any assessment or reassessmentunder the Income-Tax Act or Wealth-Tax Act inrespect of undisclosed income declared.
4-Benefits of Declaration
5-Who Can Make theDeclaration?All persons including :- Individuals HUF’s (through its Karta) Companies (through its MD/ Director) Firms (through its Managing Partner /
Partner) AOP/BOI (through its Member or the
Principal Officer thereof) Non-Residents
The declaration has to be made to yourJurisdictional Principal Commissioner orCommissioner of Income Tax.
5-Who Can Make theDeclaration? Any person, who has made a declaration
under IDS in respect of his income or as arepresentative assessee in respect of theincome of any other person,
He shall not be entitled to make any otherdeclaration, under IDS 2016 in respect of hisincome or the income of such other person,and
Any such other declaration, if made, shall bevoid.
6-Who cannot make the Declaration?
To whom notice has been issued under section
142(1)/143(2)/148/153A/153C of Income Tax Act, 1961
and proceeding is pending before the Assessing Officer;
Search/Survey have been conducted under section
132/132A/133A and a notice has not been issued and
time for such issuance 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 IT
Act in respect of such undisclosed asset.
6-Who cannot make the Declaration?
Whose foreign income/ asset qualifies underthe Black Money (Undisclosed Foreign Incomeand Assets) and Imposition of Tax Act,2015
Detainees under Conservation of ForeignExchange and Prevention of SmugglingActivities Act, 1974.
Persons notified under Special Courts (Trialof Offences Relating to Transaction inSecurities) Act (1992), cases of prosecutionunder NDPS Act, Prevention of Corruption Act,and certain offences under Indian Penal Code.
7-Manner of declaration Form 1 - Declaration form (to be filled by the
declarant by 30th Sep, 2016)
Form 2 - Acknowledgment of declaration (tobe issued by PCIT/CIT within 15 days fromthe end of the month in which declaration isfiled)
Form 3 - Intimation of payment of tax,surcharge & penalty (to be furnished bydeclarant to PCIT/CIT by 30th Nov, 2016).
Form 4 - Certificate of declaration (to begranted by PCIT/CIT within 15 days from thedate of intimation of payment).
8-Critical Dates
DATE % OF AMOUNT PAYABLE30TH NOVEMEBER, 2016 Amount not less than 25% of
Tax, Surcharge and Penalty31ST MARCH, 2017 Amount not less than 50% of
Tax, Surcharge and Penalty30TH SEPTEMEBER, 2017 Remaining amount
Scheme is effective from:1st June, 2016
Declarations may be filed upto:30th September, 2016
Tax, surcharge and penalty to be paid by:
9-Declaration when void
Declaration made by Misrepresentation orsuppression of facts shall be void and shall bedeemed to never have been made under thescheme.
Non-payment of tax, surcharge and penalty onthe income disclosed under the scheme by30.11.2016.
If a person makes a declaration for his incomeor as a representative assessee in respect ofincome for some other person, he cannot makeany other declaration. Such other declarationshall be void
10 - Disadvantages of Declaration Any person making a Declaration shall not be
entitled to make any other declaration.
Any amount of tax, surcharge and penalty paidunder this scheme shall not be refundable.
No expenditure shall be allowed against anyincome disclosed.
The declarant cannot reopen any assessment orreassessment made under Income Tax orWealth Tax Act or claim any set off or relief inany appeal, reference or other proceeding inrelation to any such assessment orreassessment.
No immunity for Tax and Interest is providedunder other economic laws like Service tax,VAT, SEBI Act, etc although no information isshared.
The liability for special cases under incometax act and wealth tax shall remain the samedespite of this disclosure.
10 - Disadvantages of Declaration
11-What if you don’t opt for IDS? Undisclosed income which is not declared under the
Scheme will be brought to tax in the year in whichnotice is issued by the Department.
Interest under section:- 234A- @1% p.m. for late filing of return. 234B & 234C - for non-payment of advance tax at
the respective due dates, shall be payable.
Penalty - U/s 270A(1)- A sum equal to 50% / 200 %of the amount of tax payable on under-reported/misreported income.
Prosecution-u/s 276C – For wilful attempt to evadetax, penalty or interest, rigorous imprisonment for aterm extending from 3 months to 2 years along withfine shall be levied.
12-Tax on Non disclosure v/s IDSUnder normal Provisions Under IDS
Particulars Amount Particulars Amount
Undisclosed Income
200,00,000 Undisclosed Income
200,00,000
Tax on above(@30%)
60,00,000 Tax on above(@45%)
90,00,000
Cess (@3%) 18,00,000Interest (u/s 234A,B,C)
27,00,000
Penalty (u/s 270A) @ 50%
39,00,000
Total TaxLiability
144,00,000 Total Tax Liability
90,00,000
FAQ1- It has been stated that the department willnot make any enquiry in respect of sources ofincome, payment of tax, surcharge and penalty,
Whether the payment of Tax under the Scheme canbe made out of undisclosed income without includingthe same in the income declared, thereby bringingdown the effective rate of tax, surcharge andpenalty to around 31 per cent?
The immunity will be provided only with respect todeclared income and IDS unambiguously providefor payment of tax, surcharge and penalty at therate of 45% of undisclosed income.
13-Some Critical Queries
Some Critical Queries FAQ 2-Will the information in the declaration be
shared with any law enforcement agency or keptconfidential? Whether immunity will be providedunder other economic laws including Service Tax,VAT, Companies Act, SEBI Act & regulations etc.?
The income disclosed is kept confidential and shallnot to be shared with any law enforcement agency,not even within the income tax department. TheScheme provides immunity for penalty &prosecution under the IT Act, Wealth-tax Act &Benami Transactions (Prohibition)Act, subject tocertain conditions.
FAQ 3- If a person declares only a part of hisundisclosed income, will he get the immunityunder the scheme in respect of the incomedeclared?
A person will get the immunity ONLY inrespect of the part of income declared but noimmunity shall be given to him in respect ofundisclosed income which he has not declared.
Some Critical Queries
FAQ 4- If only part payment of tax, surchargeand penalty is made, then whether entiredeclaration shall be valid or pro-rata declarationon which such tax has been paid, shall remainvalid ?
In case of part-payment, the entire declarationshall become invalid
Some Critical Queries
FAQ 5-Whether at the time of declaration, willthe Principal Commissioner/ Commissionermake any enquiry in resect of such declaration ?
No, only an enquiry will be made if anyproceeding under section 142(1) / 143(2) / 148/ 153A / 153C is pending.
Some Critical Queries
FAQ 6- Can a declaration made under theScheme be revised before the date of closure ofthe Scheme i.e. 30.09.2016?
Revised declaration can be filed on or before thedate of closure of the Scheme provided theundisclosed income in the revised declarationis not less than the undisclosed incomedeclared in the declaration already filed.
Some Critical Queries
FAQ 7- Whether credit for tax deducted, if any,in respect of income declared shall be allowed?
Yes; credit for tax deducted shall be allowedonly in those cases where the related income isdeclared under the Scheme and the it has notalready been claimed in the return of incomefiled for any AY.
Some Critical Queries
Some Critical Queries
FAQ 8- In case a trust or institution registeredunder section 12A of the IT Act files declarationunder the Scheme, whether such registration becancelled on the basis of such declaration?
No, the registration shall not be cancelledsolely on the basis of the information furnishedin the declaration filed.
Some Critical Queries
FAQ 9- Whether the assesse can disclose theundisclosed income reflected in the form offictitious liability, as it may not be possible tolink it to any specified asset/investment?
Fictitious liabilities can be disclosed under thescheme without linking the same with any assetbut in cases where there is a direct linkbetween the fictitious liability and the assetacquired, then the amount declared shall be thefair market value of the acquired asset as on 1st
June 2016.
Some Critical Queries
FAQ 10- An undisclosed income pertaining to theyear falls beyond the time limits of section 149 i.e,six years from the end of relevant A.Y. However, asper the declaration scheme, the undisclosed incomecan relate to any year prior to AY 2016-17. Will theprovisions of the declaration scheme prevail over theearlier laws?
Since the scheme is a later law in time, theprovisions of the scheme shall prevail. We cannotescape disclosure even if the undisclosed incomepertains to the year beyond six years.
14-Benami Transactions
The provisions of the Benami Transactions(Prohibition) Act, 1988 (45 of 1988) shall not applyin respect of the declaration of undisclosed incomemade in the form of investment in any asset, if theasset existing in the name of a benamidar istransferred to the declarant, being the personwho provides the consideration for such asset, orhis legal representative, by 30th Sep 2017.
14-Benami Transactions
Few Question which Come to our Mind are:-
1. Will there be any Capital Gain on the same ?
2. Will there be any requirement of deduction ofTDS under section 194 IA of the Income Tax Act,1961 ?
3. What would be the financial impact of the saidtransfer of Property as per Stamp Act ?
15-Tax impact on BenamiTransactions
In a case, where the declarant gets the Benamiasset transferred in his name without payingany monetary consideration to thebenamidar, no question of capital gain in thehands of the benamidar will arise.
Also, no tax shall be deducted at source at therate of 1% since the consideration foracquisition of this property has already beenpaid by the beneficial owner and this transfer isonly to regularize the transfer.
As per Rule 3 of the IDS Rules, the fair marketvalue of an immovable property shall be higher of –
its cost of acquisition; and
the price that the property shall ordinarilyfetch if sold in the open market on the 1st dayof June, 2016 on the basis of the valuationreport obtained by the declarant from aregistered valuer.
16-Diclosure of Capital Assets
If the value of immovable property determinedunder Rule 3 of the IDS Rules is lower than thevalue adopted or assessed by stamp valuationauthority referred in Section 50C of the IT Act, thenthe value in such cases shall be computed as perIDS Rules even if such value is lower than thevalue adopted by stamp valuation authority.
The period of holding of asset declared under thescheme shall be based on the actual date ofacquisition of asset. However, the indexationbenefit in respect of the amount declared under thescheme shall be available from 01.06.2016.
Tax impact on Capital Assets
This presentation has been prepared to provide agist of the applicable law pertaining to IncomeDeclaration Scheme, 2016 which is covered underChapter IX of Finance Act, 2016.
For detailed insight and for better understanding ofthe various provision of the said law, the saidpresentation should be read along with relatedprovision of Income Tax Act, 1961 and Income TaxRules,1962.
We shall not be responsible for any decision takenon the basis of the said presentation, withoutobtaining our professional guidance or consultationon the matter for which reliance was made on thispresentation.”
DISCLAIMER:-
For any Further Queries & Clarification Contact
CA. Ashish Kapoor CA Vasudha JianPartner Asso. DirectorDirect Tax Vertical Direct Tax [email protected] [email protected]
Asija & AssociatesChartered Accountants
Ph. no. : 0522- 4004652, 2205072
Thank You….