CA Umesh Sharma

Arjuna (Fictional Character): Krishna, nowadays income tax department is conducting survey, raids, etc. almost everywhere. Because of this, confusion is arising among people. What is its intention? Please give details about it.

Krishna (Fictional Character): Arjuna, to get black money disclosed, government has introduced “Income Declaration Scheme (IDS)” in budget this year. But this scheme did not get a good response from taxpayers. Therefore, the income tax department is conducting raid, survey, etc. to involve the taxpayers in this scheme. Also, income tax officers are conducting meetings of doctors, contractors, etc. to instigate them to participate in IDS. Because of all these proceedings conducted by income tax department, a feeling of fear is arising among the taxpayers. But the taxpayers are not declaring black money under IDS as love for black money is more or no fear of income tax and a feeling of opposing it is getting created.

Arjuna: Krishna, why is everybody in love with black money?

Krishna: Arjuna, probably, people work for day and night to earn money and giving a part of it to the government becomes difficult. Day by day the needs of people are rising. The earned money falls short to everybody and that is why, there is love for money earned by evading tax. Also, why only I should pay tax? Isn’t there anybody else?, these kinds of misconceptions are there in the society. Many people think that nobody is watching them and that is why the way through which they are earning money is right. In this century, the one whose income gets disclosed is devil and the one whose is hidden is humanitarian! So, if tax evasion is caught then only I will pay tax, otherwise I am not the one, is the thinking among people.

fear-of-tax-department

Arjuna: Krishna, why is government behind the one who are following law?

Krishna: Arjuna, our country is an agriculture-based country. 75% of population is dependent on agriculture. The income earned from agriculture is tax-free. Also, out of the remaining population, only 5 Crore people are taxpayers. That is why; the burden of paying tax comes on the shoulders of these taxpayers. So the government will be behind the one who is having taxable income in the same way as stones are thrown on the tree which has more fruits to get fruits from it.

Arjuna: Krishna, why are taxpayers afraid of income tax department?

Krishna: Arjuna, it is compulsory for each taxpayer to file income tax return. If return is not filed, then penalty is levied and if it is filed then the government expects that the tax paid is correct. But many-a-times, taxpayers show incorrect details related to income so as to pay less tax. So there is always a feeling of fear among taxpayers that if the income tax department conducts survey, raid, etc., then the income earned through tax evasion will get disclosed. IDS is the last chance for taxpayers, otherwise it is being said by various levels from prime minister to income tax officers that serious action will be held against the taxpayers evading tax. News is being published in various newspapers, magazines and on TV, radio, etc. that there will be an outbreak of serious action if not participated in this scheme. There are many powers given to income tax officers in law, but due to shortage of time, work load, and due to various other reasons, proceedings would not get conducted. Now due to computerized technology, PAN, bank, registry office, sellers of vehicles, details if purchase amount of gold or jewellery exceeds Rs.5 Lacs, etc. and through various similar provisions, the income tax department is getting information about taxpayers. It is felt that definitely some action will be taken someday.

Arjuna: Krishna, how a taxpayer can get out of the love for black money or fear of income tax?

Krishna: Arjuna, it was expected by the government that taxpayers would participate in this scheme but it did not get the response as they wanted. So, income tax department is conducting survey, meetings of taxpayers and giving a warning to them. The government has been collecting information about taxpayers to make them participate in various schemes introduced by it and with its help they are going get the black money disclosed from taxpayers and make them pay tax on it along with interest and penalty. That is why, taxpayers should get alert and declare black money by participating in this scheme in this last week and get relieved.

Arjuna: Krishna, what is Income Declaration Scheme of income tax due to which the love for money and fear of income tax will get reduced?

Krishna: Arjuna, the main features of this scheme is as follows:

  1. If undisclosed income is declared under this scheme, then 30% income tax, 7.5% surcharge and 7.5% penalty i.e. 45% tax will have to be paid on such undisclosed income.
  2. The financial year of income or investment made out of such income which is declared under this scheme shall be till year 2015-16. Similarly, if a taxpayer has not filed return or has not included any income in the income tax return, then he can opt for this scheme. Notice for Scrutiny, assessment, etc. should not have been received earlier for such years.
  3. If taxable income is in the form of assets, then the fair market value as on 1st June 2016 will have to be taken as value of the asset. In this scheme, gold, diamonds, pearls, jewellery, cash, etc. can be declared.
  4. Under this scheme, one will have to pay minimum 25% tax, surcharge and penalty till 30th November 2016, 50% till 31st March 2017 and 100% till 30th September 2017.
  5. The person applying for this scheme and the related details will be kept secret.

Arjuna: Krishna, what should taxpayers learn from this fight?

Krishna: Arjuna, everyone feels to live a peaceful and happy life. An obstacle is created for it due to love for money. Some people are not satisfied by this also and someday fear comes in mind of income tax. The one, who has to get out of this fear, should participate in this scheme. Also the one who wants to live a peaceful and happy life should participate in this scheme. Due to this, the love for money and fear of income tax will get reduced and it will help the nation to grow financially. If the government utilizes it in providing proper facilities, then the feeling of not paying tax will get reduced among the taxpayers otherwise the feelings of taxpayers will get hurt if there is corruption and improper facilities are provided. IDS has come into existence only because of not following the law. If good policies are created ahead and they are implemented properly, then such schemes would not be required to be created. It is important that the taxpayer understands that whether IDS is a failure of law formation or not.

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