Summary: The Direct Tax Vivad Se Vishwas Scheme, effective from October 1, 2024, provides a resolution mechanism for taxpayers with pending appeals related to direct taxes. Taxpayers can settle disputes by paying a portion of the disputed tax, interest, or penalty, with the amount depending on the timing and type of dispute. For disputes before January 31, 2020, payments are lower if settled by December 31, 2024. Those after this date incur higher amounts. The scheme also allows reductions for cases where taxpayers have received favorable past rulings. To benefit, a taxpayer must file a declaration with the designated authority, who will then determine the payable amount and issue a certificate. Payment must be made within 15 days of receipt. However, cases involving serious offenses or undisclosed foreign assets are excluded from this scheme. The initiative encourages early settlement, providing taxpayers an opportunity to resolve disputes efficiently and avoid ongoing litigation.
Arjuna: Krishna, I’ve been hearing about this new Vivad Se Vishwas Scheme, 2024, but I’m still confused about how it works. Can you explain it to me?
Krishna: Arjuna, this scheme is like a peace treaty for taxpayers which will be effective from 1st October 2024. Under the scheme, appellants with pending appeals or writ petitions related to direct taxes can resolve disputes by paying a portion of the disputed tax, interest, penalty, fee. The benefits vary depending on when the dispute is settled.
Arjuna: That sounds like a relief! But how much exactly does a taxpayer need to pay to settle their dispute?
Krishna: Arjuna! It depends on the timing of the payment and the type of dispute.
Let me break it down for you in a tabular format for simple understanding:
| Dispute Type | Settlement Date | Amount Payable |
| 1. Disputes before 31/01/2020 | Before 31/12/2024 | Disputed Tax + 10% |
| After 01/01/2025 | Disputed Tax + 20% | |
| 2. Disputes after 31/01/2020 | Before 31/12/2024 | Full Disputed Tax |
| After 01/01/2025 | Disputed Tax + 10% | |
| 3. Disputed Interest/Penalty/Fee Disputes pre – 31/01/2020 | Before 31/12/2024 | 30% of Disputed Interest/Penalty/Fee |
| After 01/01/2025 | 35% of Disputed Interest/Penalty/Fee | |
| 4. Disputed Interest/Penalty/Fee Disputes post – 31/01/2020 | Before 31/12/2024 | 25% of Disputed Interest/Penalty/Fee |
| After 01/01/2025 | 30% of Disputed Interest/Penalty/Fee |
If the appeal or writ petition is filed by the Income Tax Department and not the taxpayer, the taxpayer only needs to pay half of the amounts mentioned in the table.
If an appellant files an appeal before the Commissioner (Appeals) or Joint Commissioner (Appeals) or raises objections before the Dispute Resolution Panel on an issue where they have already received a favorable decision from the Income Tax Appellate Tribunal (ITAT) or the High Court (and the decision has not been reversed by a higher court), the amount payable will be reduced to half of amount calculated in table above.
Similarly, if an appeal is filed before the ITAT on an issue where the appellant already received a favourable decision from the High Court (and it has not been reversed by the Supreme Court), the payable amount will also be reduced to half of amount calculated in table above.
So, Arjuna, it’s clear that settling early will save you a lot of money. It’s like a festival sale the earlier you shop, the bigger the discount.
Arjuna: Krishna, how does one can take benefit of this scheme and what details need to be furnished?
Krishna: Arjuna, to benefit from this scheme, a declarant must file a declaration with the designated authority. The declaration should be in the prescribed form, detailing the particulars of the tax arrears such as disputed tax, interest, penalty, or fee.
Once the declaration is filed, all pending appeals or petitions before the authorities will be considered withdrawn. If any writ or special leave petitions have been filed in higher courts, the declarant must also withdraw them after receiving approval for the scheme.
Arjuna: Krishna, once a declaration is filed, how and when should the payment be made under this scheme?
Krishna: The process is straightforward, Arjuna. Once the declaration is filed, the designated authority will determine the amount payable within 15 days and issue a certificate to the declarant with the necessary details. The declarant then has 15 days from receiving the certificate to make the payment and inform the designated authority. All related cases will be withdrawn, and no further action will be taken on those issues.
Arjuna: Krishna, what are the various forms notified to avail the benefit of this scheme?
Krishna: Arjuna! Four key forms have been notified for the scheme:
- Form-1: For filing the declaration and undertaking by the taxpayer.
- Form-2: Certificate issued by the Designated Authority.
- Form-3: For informing the payment made by the taxpayer.
- Form-4: Order for final settlement by the Designated Authority.
Arjuna: But Krishna, can anyone and everyone benefit from this scheme?
Krishna: Not everyone, Arjuna. This scheme has some exclusions. If your case involves serious offences like undisclosed foreign assets, or if the tax department found hidden income during a search, this scheme won’t apply. For regular tax disputes, though, most people will qualify.
Arjuna: Understood! What should taxpayers learn from this, Krishna?
Krishna: Arjuna, the lesson here is simple—don’t delay! This scheme gives taxpayers a peaceful way to resolve their disputes and clear their past records. Settling early saves money, brings peace of mind, and lets you focus on the future without the tax department constantly knocking on your door. The taxpayers should not miss this opportunity and close their disputes.
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