the income declaration scheme, 2016

THE INCOME DECLARATION SCHEME, 2016

1) Timeline Declarations for undisclosed

income

From June 1st

, 2016 to

September 30th

, 2016

Payment of dues on the

undisclosed income

Earlier of:

• Within 2 months of

declaration; or

• Latest by November

30th

, 2016.

2) Definitions Declarant Person making the declaration under this

scheme. (Assesse or his authorized

representative as the case may be.)

Other words

not defined

As per the relevant definitions of the applicable

Acts.

3) Declaration of

undisclosed income

Declaration to be filed for any income chargeable to tax under the

Income Tax Act, 1961 as per the Timeline as stated above for any

Assessment Year prior to the Assessment year being A/Y 2017-2018:

• Assessee has failed to file ITR u/s 139.

• Income not disclosed in the ITR before commencement of

this scheme.

• Income has escaped assessment or all material facts have not

been disclosed and this is because of the mistake

attributable to assessee.

• Unexplained assets or investments attributable to

undisclosed income shall be valued on the FMV prevailing on

the date June 1st

, 2016.

• FMV of any asset to be determined in such manner as may

be prescribed.

• No deductions or allowances are to be claimed on the

incomes disclosed as per this scheme.

4) Charge of tax and

surcharge

Overruling the Income Tax Act or any Finance Act:

a. Declared undisclosed

income

30%

b. Surcharge on (a) (KKC) 25%

c. Penalty on (a) 25%

d. EFFECTIVE RATE 45%

5) Manner of declaration Competent Authority Principal CIT or CIT

Person authorized to sign the

declaration

In the same manner the return

of income (ITR) is

signed/authenticated by the

assessee as stipulated by the

provisons of the Income Tax Act.

Restrictions • One declaration per

assessee.

• Any other declaration

under this scheme shall

be void.

6) Time for payment of

tax

Tax dues as per this scheme to be paid as per the timeline stated

above.


Proof of such payments to be filed with the Competent Authority.

Any failure to pay the tax dues as per the declaration made as per

the time specified will deem that the declaration was not filed at all.

7) Undisclosed income

declared not to be

included in total

income

Income declared as per the provisions of this scheme shall not be

included in the total income of the assessee for any Assessment Year

for which he has paid the dues as per point 4).


declared not to affect

finality of completed

assessments

The declarations under this scheme and the assessments under the

Income Tax Act, 1961 are mutually exclusive and declarations made

under this scheme are to be dealt with as a separate issue not in

consonance with the Act.


declared not to be

treated as benami

transactions in certain

cases

The provisions of the BENAMI TRANSACTIONS(PROHIBITION) ACT,

1988 shall not apply in respect of the declarations of undisclosed

income made in the form of investment in any asset, if the asset

existing in the name of a benamidar is transferred to the declarant,

being the person who provides the consideration for such asset, or

his legal representative, within the period notified by the CG.

10) Tax in respect of

voluntarily disclosed

income not refundable

Any payment of dues as per point 4) shall be non-refundable. (Any

excess payments shall not be refunded back to the declarant. In

simple words any amount paid as dues under this scheme shall not

be refundable in any case.)

11) Declaration not

admissible in evidence

against declaration

Any disclosures made under this scheme shall not qualify to be

admissible evidence(s) in any law in force for the purpose of:

• Penalty imposition proceedings (except under this scheme)

• Prosecution under the Income Tax Act, 1961 or Wealth Tax

Act, 1957

Note: This point is notwithstanding anything contained in any law for

the time being in force.

12) Declaration by

misrepresentation of

facts to be void

Any declaration made under this scheme by

misrepresentation/suppression of facts shall render this declaration

to be void and it shall be deemed that the declaration was never

made.

13) Exemption from

Wealth Tax in respect

of assets specified in

declaration

First Clause: In respect of undisclosed income represented by

cash(including bank deposits), investments or in any assets as

specified in the declaration:

• Assessee has failed to file a return of net wealth under the

Wealth Tax Act by April 1st

, 2015; or

• Such have not been disclosed in the returns for the said

assessment year(s); or

• Value of such assets has been underreported in the return of

net wealth,

Second Clause: Then overruling the Wealth Tax Act and its bye-laws:

� No wealth tax shall be paid for such assessment year(s).

� Such assets shall not be included in the net wealth of the

assessee in these years.

� The amount of undervaluation of such assets if exceeds the


amount disclosed(for acquiring such assets) as per the

scheme by the declarant shall be taken into account in

computing the net wealth of the declarant for the said

Assessment Year(s).

� Above points shall not be applicable as for computing the net

wealth or interests of partners in the firm if, the declarant is a

firm.

Note: First Clause not to apply unless point 6) is fully satisfied.

14) Applicability of certain

provisions of Income

Tax and Chapter V of

Wealth Tax

� The provisions of Chapter XV of the Income Tax Act relating

to liability in special cases and of section 189 of that Act or

� Provisions of Chapter V of Wealth Tax Act relating to

liability in respect of assessment in special cases

Shall apply mutatis mutandis as they apply in relation to proceedings

under the Acts mentioned herein.

15) Scheme not to apply to

certain persons

The following persons are not qualified to make a declaration under

this scheme: (Extract from the bill)

a. A person on whom an order of detention has been made

under the Conservation of Foreign Exchange and Prevention

of Smuggling Activities Act, 1974, provided that:

� such order of detention, being an order to which the provisions of section

9 or section 12A of the said Act do not apply, has not been revoked on the

report of the Advisory Board under section 8 of the said Act or before the

receipt of the report of the Advisory Board; or


9 of the said Act apply, has not been revoked before the expiry of the time

for, or on the basis of, the review under sub-section (3) of section 9, or on

the report of the Advisory Board under section 8, read with sub-section

(2) of section 9 of the said Act; or


12A of the said Act apply, has not been revoked before the expiry of the

time for, or on the basis of, the first review under sub-section (3) of that

section, or on the basis of the report of the Advisory Board under section 8,

read with sub-section (6) of section 12A, of the said Act; or

� such order of detention has not been set aside by a court of competent

jurisdiction.

b. in relation to 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;

c. to any person notified under section 3 of the Special Court

(Trial of Offences Relating to Transactions in Securities) Act,

1992;

d. 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;

e. In relation to any undisclosed income chargeable under the

Income Tax Act for any Asssessment Year prior to

Assessment Year 2017-2018: � Where notices under the following have been issued under the Income

Tax Act in respect of such Assessment Year and the proceeding is pending

before the AO: o Notice u/s 142; or

o SCN for Scruitny Assessment/Reassessment; or


o Notice for income escaping assessments.

� A few more cases(Income Tax Act, 1961): o A search has been conducted; or

o Requisition has been made; or

o Survey has been carried out in a Previous Year and a SCN for Scruitny

Assessment/Reassessment has been issued relevant to such Previous

Year; or

o Notices u/s 153A or 153C 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; or

� Where owing to DTAA or TIEA entered by the Government with other

Countries or Territories, any information has been received by the

competent authority in respect of such undisclosed asset.

16) Removal of doubts Benefits, concessions or immunity under this scheme shall be

available only to the declarant.

If the dues as stipulated as per the provisions of this scheme are not

paid within the timeline then the undisclosed income so declared

shall be taxable as per the provisions under the Income Tax Act,

1961.

Where any income has accrued/received/arisen as the case may be

or any asset is acquired thereof prior to commencement of this

scheme for which the assessee has not made any declaration under

this scheme, then it shall be deemed that such event has taken place

in the year in which a notice under the following sections is issued by

the AO and the provisions of the Act shall apply accordingly:

� Notice u/s 142;

� SCN for scrutiny assessment/reassessment;

� Notice for income escaping assessments;

� Notice u/s 153A or 153C.

17) Power to remove

difficulties

CG may by notification in Official Gazette make rules for carrying out

the provisions of the Act.

18) Power to make rules CG may by notification in Official Gazette not inconsistent make rules

to remove the difficulty.


Why is the Income Declaration Scheme introduced? (Relevant extract from the Finance Minister’s Budget Speech, 2016)

CLEARING THE AIR: We are moving towards a lower tax regime with non-litigious approach. Thus, while compliant taxpayers can expect a

supportive interface with the department, tax evasion will be countered strongly. Capability of the tax department to

detect tax evasion has improved because of enhanced access to information and availability of technology driven analytical

tools to process such information. I want to give an opportunity to the earlier non-compliant to move to the category of

compliant.

LAST CHANCE FOR THE BLACK MONEY HOLDERS TO COME CLEAN:

I propose 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 by paying tax at 30%, and surcharge at 7.5%

and penalty at 7.5%, which is a total of 45% of 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 proposed subject to

certain conditions. We plan to open the window under this Income Disclosure Scheme from 1st June to 30th September,

2016 with an option to pay amount due within two months of declaration.

THE COMMITMENT: Our Government is fully committed to remove black money from the economy. Having given one opportunity for evaded

income to be declared once, we would then like to focus all our resources for bringing people with black money to books.

NON-APPLICABILITY OF THE SCHEME IN CERTAIN CASES: (Extract from the Memorndum explaining the

Finance Bill, 2016) � where notices have been issued under section 142(1) or 143(2) or 148 or 153A or 153C, or

� where a search or survey has been conducted and the time for issuance of notice under the relevant provisions of

the Act has not expired, or

� where information is received under an agreement with foreign countries regarding such income,

� cases covered under the Black Money Act, 2015, or

� persons notified under Special Court Act, 1992, or

� cases covered under Indian Penal Code, the Narcotic Drugs and Psychotropic Substances Act, 1985, the

Unlawful Activities (Prevention) Act, 1967, the Prevention of Corruption Act, 1988.

IMPORTANT: RECENT AMENDMENTS TO THE FINANCE BILL 2016: Now, the bill passed by Lok Sabha also made referencing to section 119 (Instruction to subordinate authorities) and section 138 (Disclosure if information respecting taxpayer) to the Scheme.

the income declaration scheme, 2016

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