Amit Jain

Amit Jain

In the latest move, the GOI has come up with a scheme called Income Declaration Scheme 2016. The scheme is a move by the GOI to collect the revenue and at the same time provide an opportunity to the people who have failed to disclose their income or assets to declare their income and get the relief.

We have tried to explain the scheme in the simple language as under:

The scheme is known as Income Declaration Scheme, 2016 (herein after referred to as the “scheme” is contained in the Finance Act 2016 , which received the assent of the President as on 14 May 2016.

1. Who can avail it ?

The scheme is for all those persons who have not paid taxes in past to come forward and declare their income. They need to pay just 45% of the undisclosed income as tax (which will take of all taxes, interest , penalty and safeguard from the prosecution).

The scheme is applicable for

a. any income or

b. any income in form of any investment in the asset located in India (Value of asset to be taken as fair market value as on 01.06.2016; also would be liable to capital gain tax in future on sale of the assets)

c. and acquired out of income chargeable to tax in India under the Income Tax Act

d. for any assessment year

e. prior to assessment year 2017-18

2. Period of the Scheme :

The scheme is open from 1st June 2016 and up to 30th September 2016.

3. Process of Declaration:

a. The Declaration shall be made in form 1at any time on or before 30.09.2016.

b. Post which the jurisdictional Principal CIT/CIT will issue an acknowledgement in Form 2 within 15 days from the end of the month in which declaration under form -1 is made

c. Which will result in declarant not being liable for any adverse consequences under the scheme in respect of any income which has been declared under the scheme but found to be ineligible for the declaration.

d. The declarant shall furnish the proof of payment to the jurisdictional Principal CIT/CIT in form -3

e. After which the CIT will issue form -4 , a certificate of the accepted declaration within 15 days of the submission of the Proof of payment.

4. Who will sign the declaration:

The following person will sign the declaration :

Sl.Status of the declarantDeclaration to be signed by
1.IndividualIndividual; where individual is absent from India, person authorized by him; where the individual is mentally incapacitated, his guardian or other person competent to act on his behalf.
2.HUFKarta; where the karta is absent from India or is mentally incapacitated from attending to his affairs, by any other adult member of the HUF
3.CompanyManaging Director; where for any unavoidable reason the managing director is not able to sign or there is no managing director, by any director.
4.FirmManaging partner; where for any unavoidable reason the managing partner is not able to sign the declaration, or where there is no managing partner, by any partner, not being a minor.
5.Any other associationAny member of the association or the principal officer.
6.Any other personThat person or by some other person competent to act on his behalf.

5. Can I file declaration online:

The declaration may be filed in any of the in any of the following under mentioned ways :

a. Online on the e filling website of the Income Tax site using DSC or electronic verification code or

b. In paper form before the jurisdictional Principal CIT/CIT.

6. Is Declaration possible in all cases :

No, as per the scheme the declaration cannot be made in following cases.

(i) 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.

For the purposes of declaration under the Scheme, it is clarified that the person will not be eligible under the Scheme if any notice referred above has been served upon the person on or before 31st May, 2016 i.e. before the date of commencement of this Scheme.

In the form of declaration (Form 1) the declarant will verify that no such notice has been received by him on or before 31st May, 2016.

(ii) -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 the time for issuance of a notice under section 143 (2) or section 153A or section 153C for the relevant assessment year has not expired.

In the form of declaration (Form 1) the declarant will also verify that these facts do not prevail in his case.

(iii) cases covered under the Black Money (Undisclosed Foreign Income & Assets) and Imposition of Tax Act, 2015.

A person in respect of whom proceedings for prosecution of any offence punishable under Chapter IX (offences relating to public servants) or

Chapter XVII (offences against property) of the Indian Penal Code or under the Unlawful Activities (Prevention) Act or

the Narcotic Drugs and Psychotropic Substances Act or the Prevention of Corruption Act

are pending shall not be eligible to make declaration under the Scheme.

A person notified under section 3 of the Special Court (Trial of Offences Relating to Transactions in Securities) Act or

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,

subject to the conditions specified in the Scheme, shall also not be eligible for making a declaration under the Scheme.

7. Invalid Declaration:

In the following situations, a declaration shall be void and shall be deemed never to have been made:-

a. If the declarant fails to pay the entire amount of tax, surcharge and penalty within the specified date, i.e., 30.11.2016;

b. Where the declaration has been made by misrepresentation or suppression of facts or information.

c. Where the declaration is held to be void for any of the above reasons, it shall be deemed never to have been made and all the provisions of the Income-tax Act, including penalties and prosecutions, shall apply accordingly.

Any tax, surcharge or penalty paid in pursuance of the declaration shall, however, not be refundable under any circumstances.

8. Effects of the declaration :

Where a valid declaration as detailed above has been made, the following consequences will follow:

a) The amount of undisclosed income declared shall not be included in the total income of the declarant under the Income-tax Act for any assessment year;

b) The contents of the declaration shall not be admissible in evidence against the declarant in any penalty or prosecution proceedings under the Income-tax Act and the Wealth Tax Act;

c) 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;

d) The value of asset declared in the declaration shall not be chargeable to Wealth-tax for any assessment year or years.

e) Declaration of undisclosed income will not affect the finality of completed assessments. The declarant will not be entitled to claim re-assessment of any earlier year or revision of any order or any benefit or set off or relief in any appeal or proceedings under the Income-tax Act in respect of declared undisclosed income or any tax, surcharge or penalty paid thereon.

9. Few other clarifications

a. In case where the undisclosed is represented in form on an investment and asset is partly from income assessed to tax in earlier years and partly from undisclosed assets

Then as per sub rule (2) of rule 3of the Income Declaration Scheme, proportionate value of assets acquired from the assessed income shall be reduced from the total cost of asset.

Eg. Asset acquired earlier years for Rs 500, out of which 200 from assessed income and 300 from undisclosed income and value of asset as on 01.06.2016 is Rs 1500, then undisclosed income shall be

1500 – (1500*200/500)=900

b. Immunity is available only in respect of income declared and not on undeclared income

c. Income earned through corruption shall not be eligible for the scheme.

d. Information under the scheme shall be kept confidential as in case of Return of Income filled by the assessees

e. No valuation report is required for the undisclosed asset in form of assets. However, it is advised that the declaration should have the valuation report .

The source of the article is circular 16/2016 and circular 17/2016 uploaded on the Incometaxindia.gov.in website of the Income Tax.

(The author can be reached at ajainco02@gmail.com or m no 98910-61724)

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  • pankaj

    An individual/HUF had deposited amounts in different previous years since 1998 in different banks (saving bank a/c) and FD (in other names) and also paid premium for insurance etc out of undisclosed income.He also possess cash in hand. Now he wants to declare it in IDS. the question is whether he has to declare year wise deposits and payment of premium or the total amount in banks, FD etc as on 01-06-2016.Please give suggestion.

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