A comparative analysis of new income declaration scheme and settlement scheme

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Customer Care No. 91-11-45562222
A comparative analysis of new income declaration
scheme and settlement scheme
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• Amongst the various new schemes and changes
  brought about by the Budget, 2016, one of the
  most talked about and significant change is
  Income Declaration Scheme, 2016 (" herein after
  referred to as "the Scheme" or "New Scheme" or
  "Disclosure Scheme, 2016" in the context in which
  it is required) . The Scheme which has come into
  effect from 1st June, 2016 vide notification
  dated 19th May, 2016 is expected to bring about a
  change in the manner of disclosure/declaration of
  undisclosed/undeclared income. The Scheme has
  been introduced as a separate chapter, Chapter
  IX, to Finance Act, 2016.Further, the government
  has notified the Income Declaration Rules,
  2016(hereinafter referred as the Rules)to give
  effect to various provisions of the Scheme.
• Presently, the penal consequences of not
  disclosing income (technically speaking
  concealment or furnishing of inaccurate
  particulars of income) are so harsh and rigid
  that they may act as a deterrence for the
  assessee, who might wish to disclose the income,
  though there may be various others reasons for
  not disclosing the true income. In view of this,
  introduction of new Scheme of Disclosure of
  Income is a welcome change.

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• Purpose and Scope
• The main purpose of the Scheme is to provide an
  opportunity to persons who have not paid full
  taxes in the past to come forward and declare the
  undisclosed income and pay tax. The scope of the
  Scheme extends to all assesses (Individual, HUF,
  Company, Firm, Any other associations or any
  other persons). However, persons who have been
  served notice under Section 142, or 143(2), or
  148 or 153A or 153C of the Income Tax Act,
  1961(" the Act" for Short) ,persons notified
  under section 3 of Special Court (Trial of
  Offences Relating to Transaction in Securities)
  Act, persons in respect of whom proceedings under
  Chapter IX (offences relating to public servants)
  and Chapter XII (offences against property) of
  Indian Penal Code are pending, persons accused
  under Unlawful Activities (Prevention) Act or the
  Narcotic Drugs and Psychotropic Substances Act,
  or Prevention of Corruption Act have been kept
  out of the ambit of this scheme. Moreover, cases
  covered under Black Money (undisclosed Foreign
  Income and Assets) and Imposition of Tax Act,
  2015 are also left out from the Scheme.

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• Salient Features of the Scheme
• The Applicant can declare any income chargeable
  to tax, which he has failed to disclose earlier
  for any AY prior to AY 2017-18 by making
  declaration in form No. 1.
• Where the income chargeable to tax is declared in
  the form of investment in any asset, the fair
  market value of such asset as on 1st June, 2016
  computed in accordance with Rule 3 of the Rules
  shall be deemed to be the undisclosed income.
• Aggregate tax, surcharge and penalty payable on
  the income disclosed will be 45 of the total
  undisclosed income. Tax being 30 of the income,
  increased by a surcharge of 25 and a penalty of
  25 of such tax thus totalling in all to 45 of
  the undisclosed income.
• Scheme is operation from 01.06.2016 to 30.09.2016
  and the last date for payment of tax with
  surcharge and penalty is 30.11.2016.
• The amount of undisclosed income will not be
  included in the total income of the declarant
  under the provisions of the Act for any
  assessment year.
• Immunity from the Benami Transactions
  (Prohibition) Act, 1988 shall be available in
  respect of the assets disclosed in the
  declarations subject to the condition that the
  benamidar shall transfer to the declarant or his
  legal representative the asset in respect of
  which the declaration of undisclosed income is
  made on or before 30th September, 2017

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• The value of asset declared in the declaration
  shall not be chargeable to Wealth-tax for any
  assessment year or years.
• Declaration of undisclosed income will not affect
  the finality of completed assessment. The
  declarant will not be entitled to claim
  re-assessment of any earlier year or revision of
  any order or any benefit or set off or relief in
  any appeal or proceedings under the Income-tax
  Act in respect of declared undisclosed income or
  any tax, surcharge or penalty paid thereon.
• An imminent question that arises is whether there
  exists any provision(s) under the Act itself
  regarding the disclosure of any additional income
  by the assessee in case he fails to furnish the
  same in return filed by him and if the assessee
  wishes to disclose such income and its source
  before the revenue authority?
• Indeed there exists such a provision relating to
  'settlement of case' contained in Chapter XIX- A
  of the Act, which relates to settlement of case
  pending in case of an assessee, with condition
  precedents being full and true disclosure of his
  income, payment of additional tax etc., on or
  before the date of making application u/s 245C of
  the Act.
• This article is a humble attempt at making a
  comparative analysis between the scheme regarding
  the settlement of case and the new Disclosure
  Scheme, 2016 and drawing distinctions between the
  two.

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