The Income Declaration Scheme, 2016 is a voluntary disclosure scheme of Government of India. It provides an opportunity to those persons who have not paid full taxes in the past to come forward and voluntarily declare the undisclosed income. Incorporated in the Finance Act 2016, the Income Declaration Scheme received Presidential assent on May 14, 2016. It will remain in force for a period of four months from June 1, 2016 to September 30, 2016.
Voluntary Disclosure of Income
Under the scheme, a declaration may be made in respect of any undisclosed income for any assessment year up to 2015-16. For income in the form of investment in assets, the Fair Market Value of the asset as on June 1, 2016 will be the undisclosed income. But, assets located in foreign countries or income to which the Black Money Act 2015 applies are not eligible for declaration under the Income Declaration Scheme, 2016.
Tax rate:
Income declared by the eligible persons would be taxed at the rate of 30%. In addition, there will be a Krishi Kalyan Cess at the rate of 25% of the taxes payable and a penalty at the rate of 25% of the taxes payable. So, the declarant is required to pay a total of 45% of the income declared.
Benefits:
Valid declarations would enjoy following benefits:
- The undisclosed income is not included in total income for any assessment year.
- Assets specified in the declaration are exempted from Wealth tax.
- No Scrutiny and enquiry under the Income-tax Act or Wealth tax Act.
- Immunity from prosecution under the Income-tax Act and Wealth Tax Act.
- Immunity from Benami Transactions (Prohibition) Act, 1988, subject to transfer of asset to actual owner before September 30, 2017.
Drawbacks:
- Only available for four months (June 1, 2016 to September 30, 2016).
- Those who are under scrutiny (who received notices from Income tax department) are not eligible.
Income Declaration Scheme 2016 Key points:
- Declaration can be made on any undisclosed income pertaining to Financial Year 2015-16 or earlier.
- Declaration must be made within June 1, 2016 to September 30, 2016.
- Declaration can be filed online or with the jurisdictional Principal Commissioners of Income-tax.
- Total 45% of the income declared is required to be paid.
- Payments towards taxes, surcharge and penalty can be made as late as by November 30, 2016.
- Declaration will be considered void, in case of failure to pay the total taxes, surcharge & penalty before deadline or in case of misrepresentation or suppression of facts.
- Those who have received notices under Sections 142, 143 (2), 148, 153A or 153C of the Income Tax Act are not eligible for declaration.
- The valid declarations would result in benefits like immunity from penalty or prosecution under Income-tax Act, Wealth Tax Act and Benami Transactions Act. The disclosed assets are also exempted from Wealth tax.