All you need to know about Income Declaration Scheme 2016:
If you have undisclosed income then here is a golden opportunity to come out clean. The Income Declaration Scheme (IDS) 2016, which came into effect on 1st June 2016, helps you to legalise your unaccounted money by paying tax, surcharge & penalty, all totalling up to 45% on the undisclosed income. The scheme is about bringing the undisclosed income under tax umbrella and acknowledgement of income tax liability by the assessee. Thus, if you are somebody who is falling under the tax bracket of 30%, then an extra tax rate of 15% gives you 100 percent peace of mind. So, save the dates because, under the scheme, 30 September 2016 is the last date to declare the undisclosed income.
This has not been the first attempt by the income tax department to unearth undisclosed income. Since 1951, several income disclosure schemes have been launched with only a few being successful enough to make a positive impact on the exchequer’s kitty. You need to understand that this scheme is stringent & improvised versions of all the previous schemes that is aimed at encouraging tax payers to disclose their unaccounted income. In this, you cannot escape the taxman’s lens by suppression or misrepresentation of the facts as it will make your declaration invalid.
Let me take you through the process of furnishing returns under the Income Declaration Scheme.
The person declaring income under the Income Declaration Scheme is known as a declarant. You may take advantage under the scheme if you are either a resident or an NRI. If you don’t have a PAN, then apply for it because you need to mention your PAN on the declaration form. You may file the declaration on-line on the e-filing website of the Income-tax Department using your digital signature or through electronic verification code or in paper form before the jurisdictional Principal CIT/CIT. The declaration of your undisclosed income or assets acquired through such income shall be made in Form 1. You need to mention the amount & nature of the undisclosed income & the assessment year to which it belongs. If assets have been purchased out of such undisclosed income, then you need to determine their Fair Market Value as per Rule 3 of the scheme.
The Income Declaration form can be downloaded by visiting the following link:
In case of assets like immovable property, jewellery, bullion or artistic work, the fair market value is the higher of the two values- the cost of acquisition or the price which can be fetched on sale of the asset in the market as on 1st June 2016. You should get a valuation report for the particular asset from a registered valuer. The list of valuers identified under the Income Declaration Scheme is given on the website of the income tax department.
In case of financial assets like listed equity shares, the fair market value is the higher of the two values – the cost of acquisition or the average of the lowest & highest price as 1st June 2016 on a recognized stock exchange, whichever is higher.
Form-3 should be used as the proof of payment made in respect of tax, surcharge and penalty. The last date for submission of Form-1 is 30 September 2016 & 30 November 2016 for Form-3. After the submission of Form-1 & Form-3 to the jurisdictional Principal CIT/ CIT, you will receive an acknowledgement of declaration from the said authority in Form-2 within 15 days of such declaration. The certificate of tax payment will be issued in Form-4 by the said authority within 15 days of submission of proof payment.
The breakup of the tax, surcharge & penalty under the Income Declaration Scheme is provided in the following table:
For your convenience, the central government has provided extended time lines for payment of tax, surcharge & penalty.You can pay first 25% of tax, surcharge & penalty by 30 November 2016, then next 25% amount can be paid by 31 March 2017 & the remaining balance need to be paid by 30 September 2017.
Also read: All About Income Tax Scrutiny Notice
When the Declaration is Invalid
If you either suppress or misrepresent any material fact, or fail to pay the entire amount of tax, surcharge and penalty as per the prescribed schedule, then the income declaration made by you would stand of no effect & any tax, penalty or surcharge paid would not be refunded by the tax department.
Benefits of Valid Declaration
Upon declaring income under this scheme, you will be entitled to the following benefits:
• The undisclosed income shall not be clubbed in your total income for any assessment year.
• The contents of the declaration form shall not be used as evidence against you in any legal proceedings under the Income-tax Act, 1961, and the Wealth-tax Act, 1957.
• The assets disclosed under the scheme would not be subject to any wealth tax.
• Such declaration would not have any repercussions on your already completed income tax assessments.
• Immunity from Benami Transactions (Prohibitions) Act, 1988 subject to certain conditions.
• The information disclosed in the declaration form will not be shared with any other law enforcement agencies.
Exclusions from IDS 2016
You may not be eligible to take advantage of the scheme in case of any legal proceedings against you are pending under any of the following Acts:
• Income Tax Act, 1961
• Black Money (Undisclosed Foreign Income & Assets) and Imposition of Tax Act, 2015
• Unlawful Activities (Prevention) Act
• Narcotic Drugs and Psychotropic Substances Act
• Prevention of Corruption Act
• Unlawful Activities (Prevention) Act
• Conservation of Foreign Exchange & Prevention of Smuggling Activities Act.
You should consider this as the last & final opportunity to disclose your unaccounted income. The taxman’s scanner is round the clock collecting information about the tax offenders & is all geared up with the latest state-of-art technology to send notices to tax offenders after 30 November 2016. If you want the benefit of IDS in real terms, then make sure to provide the true value of all the undisclosed income and undisclosed assets. A wrongly filed declaration may not only cost you your reputation but also non-refund of the taxes & penalties already deposited.