Income declaration scheme

Pros & Cons
Of
INCOME DECLARATION SCHEME, 2016
By:
Direct Tax Vertical
Asija & Associates
Chartered Accountants
Presentation on

Your undisclosed income is a TIME
BOMB,
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Let’s gain an insight on
Income Declaration Scheme, 2016
ashish.kapoor@asija.in

Coverage
1. What is IDS?
2. Which income can be disclosed?
3. What is the amount payable by declarant ?
4. Benefits of Declaration !!!
5. Who can make the declaration?
6. Who cannot make the declaration?
7. Process of making declaration.

Coverage
8. Critical Dates
9. What could make the declaration void ?
10.Risk of doing Income declaration under IDS
11.What if you don’t opt for IDS?
12.Tax on Non Disclosure v/s IDS
13.Some Critical queries / FAQ’s
14.Benami Transactions

Coverage
15.Tax impact on Benami Transactions
16.Disclosure of Capital Assets
17.Tax impact on disclosure of Capital Assets

1-What is IDS?
Government of India has enacted a scheme,
where by an opportunity has been given to the
assesse to voluntarily declare his income
which he has not disclosed in the past.
This Scheme is called Income Declaration
Scheme, 2016. (IDS 2016)

2.Which Income can be
Disclosed ?
The declaration shall be made in respect of the
income chargeable to Tax :-
 For which he has Failed to file his return of
income or
 For which he has Failed to disclose in his
return of income
 Which has escaped assessment by reason of
omission or failure to disclose all material
facts.
 The undisclosed income should be for any
assessment year, prior to AY 2016-17.

1. Tax @ 30% of undisclosed income
2. Surcharge Krishi Kalyan Cess @ 7.5% of
undisclosed income
3. Penalty @ 7.5% of undisclosed income
TOTAL: 45% OF UNDISCLOSED INCOME
DECLARED
3-Amount payable by declarant

4-Benefits of Declaration
 Amount of undisclosed income declared shall
not be included in the total income for any
Assessment Year, for the purpose of Income Tax
Act (ONLY).
 Immunity from prosecution under Income
Tax Act and Wealth Tax Act. (ONLY)
 Immunity from penalty under any other
laws too.
 No scrutiny or enquiry under Income-tax Act
and Wealth Tax Act in respect of the income
declared under this scheme.
 We need not explain the source of
undisclosed income. ashish.kapoor@asija.in

 No Wealth Tax shall be paid in respect of such
disclosure.
 Immunity from Benami Transactions
(Prohibition) Act, subject to transfer of assets
by the benamidar to the real owner before
30.09.2017
 No entitlement to Income Tax Department
to re-open any assessment or reassessment
under the Income-Tax Act or Wealth-Tax Act in
respect of undisclosed income declared.
4-Benefits of Declaration

5-Who Can Make theDeclaration?
All persons including :-
 Individuals
 HUF’s (through its Karta)
 Companies (through its MD/ Director)
 Firms (through its Managing Partner /
Partner)
 AOP/BOI (through its Member or the
Principal Officer thereof)
 Non-Residents
 The declaration has to be made to your
Jurisdictional Principal Commissioner or
Commissioner of Income Tax.

5-Who Can Make theDeclaration?
 Any person, who has made a declaration
under IDS in respect of his income or as a
representative assessee in respect of the
income of any other person,
 He shall not be entitled to make any other
declaration, under IDS 2016 in respect of his
income or the income of such other person,
and
 Any such other declaration, if made, shall be
void.

6-Who cannot make the
Declaration?
 To whom notice has been issued under section
142(1)/143(2)/148/153A/153C of Income Tax Act, 1961
and proceeding is pending before the Assessing Officer;
 Search/Survey have been conducted under section
132/132A/133A and a notice has not been issued and
time for such issuance has not expired.
 Where any information has been received by the competent
authority under an agreement entered into by the Central
Government under section 90 or section 90A of the IT
Act in respect of such undisclosed asset.

6-Who cannot make the
Declaration?
 Whose foreign income/ asset qualifies under
the Black Money (Undisclosed Foreign Income
and Assets) and Imposition of Tax Act,2015
 Detainees under Conservation of Foreign
Exchange and Prevention of Smuggling
Activities Act, 1974.
 Persons notified under Special Courts (Trial
of Offences Relating to Transaction in
Securities) Act (1992), cases of prosecution
under NDPS Act, Prevention of Corruption Act,
and certain offences under Indian Penal Code.

7-Manner of declaration
 Form 1 - Declaration form (to be filled by the
declarant by 30th Sep, 2016)
 Form 2 - Acknowledgment of declaration (to
be issued by PCIT/CIT within 15 days from
the end of the month in which declaration is
filed)
 Form 3 - Intimation of payment of tax,
surcharge & penalty (to be furnished by
declarant to PCIT/CIT by 30th Nov, 2016).
 Form 4 - Certificate of declaration (to be
granted by PCIT/CIT within 15 days from the
date of intimation of payment).

8-Critical Dates
DATE % OF AMOUNT PAYABLE
30TH NOVEMEBER, 2016 Amount not less than 25% of
Tax, Surcharge and Penalty
31ST MARCH, 2017 Amount not less than 50% of
Tax, Surcharge and Penalty
30TH SEPTEMEBER, 2017 Remaining amount
Scheme is effective from:
1st June, 2016
Declarations may be filed upto:
30th September, 2016
Tax, surcharge and penalty to be paid by:

9-Declaration when void
 Declaration made by Misrepresentation or
suppression of facts shall be void and shall be
deemed to never have been made under the
scheme.
 Non-payment of tax, surcharge and penalty on
the income disclosed under the scheme by
30.11.2016.
 If a person makes a declaration for his income
or as a representative assessee in respect of
income for some other person, he cannot make
any other declaration. Such other declaration
shall be void

10 - Disadvantages of Declaration
 Any person making a Declaration shall not be
entitled to make any other declaration.
 Any amount of tax, surcharge and penalty paid
under this scheme shall not be refundable.
 No expenditure shall be allowed against any
income disclosed.
 The declarant cannot reopen any assessment or
reassessment made under Income Tax or
Wealth Tax Act or claim any set off or relief in
any appeal, reference or other proceeding in
relation to any such assessment or
reassessment.

 No immunity for Tax and Interest is provided
under other economic laws like Service tax,
VAT, SEBI Act, etc although no information is
shared.
 The liability for special cases under income
tax act and wealth tax shall remain the same
despite of this disclosure.
10 - Disadvantages of Declaration

11-What if you don’t opt for IDS?
 Undisclosed income which is not declared under the
Scheme will be brought to tax in the year in which
notice is issued by the Department.
 Interest under section:-
 234A- @1% p.m. for late filing of return.
 234B & 234C - for non-payment of advance tax at
the respective due dates, shall be payable.
 Penalty - U/s 270A(1)- A sum equal to 50% / 200 %
of the amount of tax payable on under-reported/
misreported income.
 Prosecution-u/s 276C – For wilful attempt to evade
tax, penalty or interest, rigorous imprisonment for a
term extending from 3 months to 2 years along with
fine shall be levied.

12-Tax on Non disclosure v/s IDS
Under normal Provisions Under IDS
Particulars Amount Particulars Amount
Undisclosed
Income
200,00,000 Undisclosed
Income
200,00,000
Tax on above
(@30%)
60,00,000 Tax on above
(@45%)
90,00,000
Cess (@3%) 18,00,000
Interest (u/s
234A,B,C)
27,00,000
Penalty (u/s
270A) @ 50%
39,00,000
Total Tax
Liability
144,00,000 Total Tax
Liability
90,00,000

 FAQ1- It has been stated that the department will
not make any enquiry in respect of sources of
income, payment of tax, surcharge and penalty,
 Whether the payment of Tax under the Scheme can
be made out of undisclosed income without including
the same in the income declared, thereby bringing
down the effective rate of tax, surcharge and
penalty to around 31 per cent?
 The immunity will be provided only with respect to
declared income and IDS unambiguously provide
for payment of tax, surcharge and penalty at the
rate of 45% of undisclosed income.
13-Some Critical Queries

Some Critical Queries
 FAQ 2-Will the information in the declaration be
shared with any law enforcement agency or kept
confidential? Whether immunity will be provided
under other economic laws including Service Tax,
VAT, Companies Act, SEBI Act & regulations etc.?
 The income disclosed is kept confidential and shall
not to be shared with any law enforcement agency,
not even within the income tax department. The
Scheme provides immunity for penalty &
prosecution under the IT Act, Wealth-tax Act &
Benami Transactions (Prohibition)Act, subject to
certain conditions.

 FAQ 3- If a person declares only a part of his
undisclosed income, will he get the immunity
under the scheme in respect of the income
declared?
 A person will get the immunity ONLY in
respect of the part of income declared but no
immunity shall be given to him in respect of
undisclosed income which he has not declared.

 FAQ 4- If only part payment of tax, surcharge
and penalty is made, then whether entire
declaration shall be valid or pro-rata declaration
on which such tax has been paid, shall remain
valid ?
 In case of part-payment, the entire declaration
shall become invalid

 FAQ 5-Whether at the time of declaration, will
the Principal Commissioner/ Commissioner
make any enquiry in resect of such declaration ?
 No, only an enquiry will be made if any
proceeding under section 142(1) / 143(2) / 148
/ 153A / 153C is pending.

 FAQ 6- Can a declaration made under the
Scheme be revised before the date of closure of
the Scheme i.e. 30.09.2016?
 Revised declaration can be filed on or before the
date of closure of the Scheme provided the
undisclosed income in the revised declaration
is not less than the undisclosed income
declared in the declaration already filed.

 FAQ 7- Whether credit for tax deducted, if any,
in respect of income declared shall be allowed?
 Yes; credit for tax deducted shall be allowed
only in those cases where the related income is
declared under the Scheme and the it has not
already been claimed in the return of income
filed for any AY.

 FAQ 8- In case a trust or institution registered
under section 12A of the IT Act files declaration
under the Scheme, whether such registration be
cancelled on the basis of such declaration?
 No, the registration shall not be cancelled
solely on the basis of the information furnished
in the declaration filed.

 FAQ 9- Whether the assesse can disclose the
undisclosed income reflected in the form of
fictitious liability, as it may not be possible to
link it to any specified asset/investment?
 Fictitious liabilities can be disclosed under the
scheme without linking the same with any asset
but in cases where there is a direct link
between the fictitious liability and the asset
acquired, then the amount declared shall be the
fair market value of the acquired asset as on 1st
June 2016.

 FAQ 10- An undisclosed income pertaining to the
year falls beyond the time limits of section 149 i.e,
six years from the end of relevant A.Y. However, as
per the declaration scheme, the undisclosed income
can relate to any year prior to AY 2016-17. Will the
provisions of the declaration scheme prevail over the
earlier laws?
 Since the scheme is a later law in time, the
provisions of the scheme shall prevail. We cannot
escape disclosure even if the undisclosed income
pertains to the year beyond six years.

14-Benami Transactions
The provisions of the Benami Transactions
(Prohibition) Act, 1988 (45 of 1988) shall not apply
in respect of the declaration 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, by 30th Sep 2017.

14-Benami Transactions
Few Question which Come to our Mind are:-
1. Will there be any Capital Gain on the same ?
2. Will there be any requirement of deduction of
TDS under section 194 IA of the Income Tax Act,
1961 ?
3. What would be the financial impact of the said
transfer of Property as per Stamp Act ?

15-Tax impact on Benami
Transactions
 In a case, where the declarant gets the Benami
asset transferred in his name without paying
any monetary consideration to the
benamidar, no question of capital gain in the
hands of the benamidar will arise.
 Also, no tax shall be deducted at source at the
rate of 1% since the consideration for
acquisition of this property has already been
paid by the beneficial owner and this transfer is
only to regularize the transfer.

As per Rule 3 of the IDS Rules, the fair market
value of an immovable property shall be higher of –
 its cost of acquisition; and
 the price that the property shall ordinarily
fetch if sold in the open market on the 1st day
of June, 2016 on the basis of the valuation
report obtained by the declarant from a
registered valuer.
16-Diclosure of Capital Assets

 If the value of immovable property determined
under Rule 3 of the IDS Rules is lower than the
value adopted or assessed by stamp valuation
authority referred in Section 50C of the IT Act, then
the value in such cases shall be computed as per
IDS Rules even if such value is lower than the
value adopted by stamp valuation authority.
 The period of holding of asset declared under the
scheme shall be based on the actual date of
acquisition of asset. However, the indexation
benefit in respect of the amount declared under the
scheme shall be available from 01.06.2016.
Tax impact on Capital Assets

 This presentation has been prepared to provide a
gist of the applicable law pertaining to Income
Declaration Scheme, 2016 which is covered under
Chapter IX of Finance Act, 2016.
 For detailed insight and for better understanding of
the various provision of the said law, the said
presentation should be read along with related
provision of Income Tax Act, 1961 and Income Tax
Rules,1962.
 We shall not be responsible for any decision taken
on the basis of the said presentation, without
obtaining our professional guidance or consultation
on the matter for which reliance was made on this
presentation.”
DISCLAIMER:-

For any Further Queries &
Clarification Contact
CA. Ashish Kapoor CA Vasudha Jian
Partner Asso. Director
Direct Tax Vertical Direct Tax Vertical
ashish.Kapoor@asija.in incometax@asija.in
Asija & Associates
Chartered Accountants
Ph. no. : 0522- 4004652, 2205072
Thank You….

Income declaration scheme

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