Income Declaration Scheme, 2016

Income Declaration Scheme, 2016 : Complete Details

Income Declaration Scheme introduced by the Government of India to disclose the undisclosed income. 

Text of P.M. Shri Narendra Modi about the scheme :
"My dear countrymen, today I want to make a special appeal. To the people who have undisclosed income, the Government of India has given a chance to declare such income by 30th of September. And so my dear brothers and sisters, this is a golden chance for you to disclose your undisclosed income."

Who Can Make a Declaration :
All 'persons', such as individuals, HUFs, companies, firms, association of persons (AOP) etc. are eligible to make declaration under the Scheme.

Salient features of Scheme :

  • Scheme to apply to undisclosed income whether in form of assets or otherwise, petaining to F.Y. 2015-16 or earlier years.
  • In respect of undisclosed income in the form of assets, Fair Market Value of the asset as on 01.06.2016 deemed to be the undisclosed income.
  • The person making a declaration under the Scheme would be liable to pay tax at the rate of 30 percent of the value of such undisclosed income as increased by surcharge at the rate of 25 percent of such tax. In addition, he would also be liable to pay penalty at the rate of 25 percent of such tax. Therefore, the declarant would be liable to pay a total of 45 percent of the value of the undisclosed income declared by him.

Benefits of Declaration
  1. NoWealth Tax on assets declared
  2. No scrutiny or enquiry under Income-tax Act and Wealth Tax Act in respect of declaration
  3. Immunity from prosecution under Income Tax Act andWealth Tax Act in respect of declaration
  4. Immunity from Benami Transactions (Prohibition) Act, subject to transfer of assets by the benamidar to the real owner before 30.09.2017

Scope & Coverage of Scheme
Declaration can be made in respect of—
  • any undisclosed income
  • investment in any asset representing undisclosed income relating to any financial year upto 2015-16
Mode of making declaration :
To be filed online 
In print form to jurisdictional Pr. Commissioner/Commissioner of Income Tax.

Scheme does not apply if …
  • Notice has been issued under section 142(1)/143(2)/148/153A/153C of I-T Act (debarred only for AY for which notice is issued)
  • Search/Survey have been conducted (debarred for affected years only)
IDS, 2016 – Some Clarifications
  • Where undisclosed income invested in any asset is declared under the Scheme & tax, surcharge and penalty are duly paid on its fair market value as on 01.06.2016 then, any capital gains arising upon its sale in future will be computed by adopting such fair market value as on 01.06.2016 as the cost of acquisition and the period of holding shall also start from that date
  • A person is only ineligible to declare income for those assessment years for which a notice under section 142(1)/143(2)/148/153A/153C is issued and the proceeding is pending before the Assessing Officer. He is free to declare undisclosed income for other years for which no notice under the sections has been issued.
  • Where investment in any asset is partly from explained sources (income already assessed to tax) and partly from undisclosed income, proportionate reduction shall be allowed in determining the amount to be declared under the Scheme Example: In 2013-14, a person invested Rs.5 lakh in a house out of which Rs.2 lakh was from income assessed to tax in the preceding year and Rs.3 lakh was from undisclosed income for 2013-14. Fair market value of the asset as on 01.06.2016 is Rs.15 lakh. Undisclosed income to be declared under the scheme shall be: 15,00,000 – (15,00,000 x 2,00,000/5,00,000 ) = Rs.9,00,000 
  • Where assessment has already been completed and case is pending in appeal before any appellate authority, declaration cannot be filed in respect such income. However, any undisclosed income for that AY which has not been assessed can be declared. 
  • If a declaration of undisclosed income is made in good faith but is found ineligible under the Scheme on account of any of the conditions debarring such declaration (see Slide-9), the harsh consequences of non-declaration under the Scheme shall not apply, but such income may be assessed under the normal provisions of the Income-tax Act. 
  • After the declaration is made the PCIT/CIT will enquire whether any proceeding under section 142(1)/143(2)/148/153A/153C is pending for the assessment year for which declaration has been made. Apart from this no other enquiry will be conducted by him at the time of declaration.
  • Information contained in in the declaration is confidential as in the case of return of income filed by an assessees.
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