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Thursday, June 2, 2016

Everything You Need to Know about The Income Tax Declaration Scheme, 2016



Everything You Need to Know about
The Income Tax Declaration Scheme, 2016


The Income Tax Declaration Scheme, as the name suggest is disclosure of Income which has escaped assessment under Income Tax Laws. The Scheme defines the criteria of Income to be termed as Undisclosed, manner of its disclosure and Tax thereon. Before we start detailed analysis of the scheme it is important to know the reasons for bringing such a scheme for the citizens of India.

As we all are aware, as soon as this new government has come to the Parliament, there has been lot of steps taken for disclosure of Black money which has corrupted the very roots of our Country. Various methods such as Swiss Bank Name Disclosures, Panama Papers, Black Money Disclosure Scheme etc. had been tried till date to help curb the Black Money from the economy. But till date most of the methods have been proved useless as no major Black money has been disclosed. There are a lot of reasons for the same, which also involves some genuine reasons, which are:
1.      Lack of Knowledge on the parts of Tax Payers.
2.      Lack of Effective Mechanism to make defaulters disclose their money.
3.      Risk of Assessment and Re-assessment on Disclosed Income.
4.      Genuine cases of Income escaped from Assessment due to delay in filing of ITR, Wrong application of Laws and Rules etc.
5.      Political or bureaucratic pressure.

These are some well known reasons, why the various methods have failed till date. To provide one more opportunity to defaulters as well as Black money holders to disclose their income and get relief from Government interventions, scheme has been launched applicable from 1st of June 2016.

ABOUT THE SCHEME:
1.      This Scheme shall be called the Income Declaration Scheme, 2016
2.      The Scheme shall be governed by Finance Act, 2016, Income Declaration Scheme Rules, 2016 and any Circulars and Notification issued by Competent Authority
3.      Under the Scheme, any person may make a declaration in respect of any income chargeable to tax under the Income-tax Act for any assessment year prior to the assessment year beginning on the 1st day of April, 2017.
4.      The Scheme shall come in force from 1st Day of June, 2016 (01.06.2016)
5.      The Scheme shall close on 30th September, 2016 (30.09.2016)
6.      The rate of Tax Including Surcharge and Penalty will be 45%

IMPORTANT DATES UNDER THE SCHEME:

DATE OF COMMENCMENT OF SCHEME
1st Day of June, 2016 (01.06.2016)


DATE OF CLOSURE OF SCHEME
30th September, 2016 (30.09.2016)


LAST DATE OF PAYMENT OF TAX, SURCHARGE AND PENALTY
30th day of November, 2016 (30.11.2016)



LAST DATE OF TRANSFER OF PROPERTY BY BENAMIDAR
30th day of September, 2017 (30.09.2017)
[Notification No.32/2016,F.No.142/8/2016-TPL]


TYPE OF INCOME OR ASSETS WHICH CAN BE DECLARED AND WHICH CANNOT BE DECLARED
Following types of Income and Assets can be declared as Income under Income Declaration Scheme, 2016.

1.      Income can be declared for any assessment year prior to the assessment year beginning on the 1st day of April, 2017

2.      Income for which he has failed to furnish a return under section 139 of the Income-tax Act;

3.      Income which he has failed to disclose in a return of income furnished by him under the Income-tax Act before the date of commencement of this Scheme;

4.      Income which has escaped assessment by reason of the omission or failure on the part of such person to furnish a return under the Income-tax Act or to disclose fully and truly all material facts necessary for the assessment or otherwise.

5.      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 the date of commencement of this Scheme shall be deemed to be the undisclosed income for the purposes of sub-section (1).

Following types of Income and Assets cannot be declared as Income under Income Declaration Scheme, 2016.

1.      Income of Person in respect of whom an order of detention has been made under the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974

2.      Income in relation to prosecution for any offence punishable under Chapter IX or Chapter XVII of the Indian Penal Code, the Narcotic Drugs and Psychotropic Substances Act, 1985, the Unlawful Activities (Prevention) Act, 1967 and the Prevention of Corruption Act, 1988

3.      To any person notified under section 3 of the Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992;

4.      Income in relation to any undisclosed foreign income and asset which is chargeable to tax under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015

5.      Income cannot be declared under the scheme for which notice under section  142, 143(2), 148, 153A, 153C and proceeding is pending

6.      Income for which search has been conducted under section 132 or requisition has been made under section 132A or a survey has been carried out under section 133A of the Income-tax Act

7.      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 Income-tax Act in respect of such undisclosed asset


RATE OF TAX, SURCHARGE AND PENALTY

1.      Tax @ 30% will be charged on Un-disclosed income

2.      Krishi Kalyan cess @ 7.50% will be charged on Un-disclosed income

3.      Penalty@ 7.50% will be charged on Un-disclosed income

4.      Total of 45% will have to be paid before 30th November, 2016


PROCESS OF DECLERATION

1.      Declaration of Income or Income in form of Investment shall be made in FORM 1

2.      The declaration shall be furnished:
(a) Electronically under digital signature; or
(b) Through transmission of data in the form electronically under electronic verification code; or
(c) In print form, to the concerned Principal Commissioner or the Commissioner who has the jurisdiction over the declarant.

3.      Acknowledgment will be provided within 15 days from the end of month in which declaration is made in Form 2

4.      Proof of Payment of Tax, Surcharge and Penalty will have to made in Form 3

5.      After receipt of Form 3, Form 4 will be issued within 15 days from the end of month in which declaration is made to acknowledge payment of tax.


DECLERATION TO BE SIGNED BY WHOM

1.      INDIVIDUAL- By the individual himself; where such individual is absent from India, by the individual concerned or by some person duly authorised by him in this behalf; and where the individual is mentally incapacitated from attending to his affairs, by his guardian or by any other person competent to act on his behalf;

2.       HUF- By the Karta, and where the Karta is absent from India or is mentally incapacitated from attending to his affairs, by any other adult member of such family;

3.      COMPANY-By the managing director thereof, or where for any unavoidable reason such managing director is not able to sign the declaration or where there is no managing director, by any director thereof;

4.      FIRM- By the managing partner thereof, or where for any unavoidable reason such managing partner is not able to sign the declaration, or where there is no managing partner as such, by any partner thereof, not being a minor;

5.      AOP- By any member of the association or the principal officer thereof; and

6.      ANY OTHER PERSON- By that person or by some other person competent to act on his behalf.


FAIR MARKET VALUE

The fair market value of the asset shall be determined in the following manner, namely

1.    Bullion, Jewellery or precious stone- Value shall be the higher of

(I)                 its cost of acquisition; and

(II)              the price such bullion, jewellery or precious stone shall ordinarily fetch if sold in the open market as on the 1st  day of June, 2016, on the basis of the valuation report obtained by the declarant from a registered valuer;

2.    Archaeological collections, drawings, paintings, sculptures or any work of art (hereinafter referred to as artistic work) Value  shall be the higher of—

(I)                 its cost of acquisition; and

(II)              the price such artistic work shall ordinarily fetch if sold in the open market as on the 1st day of June, 2016 on the basis of the valuation report obtained by the declarant from a registered valuer;

3.    Shares and Securities of

(I)                 quoted share and securities shall be the higher of—

(i)                 its cost of acquisition; and

(ii)               the price determined by taking—


(A)  the average of the lowest and highest price of such shares and securities quoted on a recognised stock exchange as on the 1st day of June, 2016; or

(B)  the average of the lowest and highest price of such shares and securities on a recognised stock exchange on a date immediately preceding the 1st day of June, 2016 when such shares and securities were traded on a recognised stock exchange, where on the 1St day of June, 2016 there is no trading in such shares and securities on a recognised stock exchange;

(II)              unquoted equity shares shall be the higher of

(i)                 its cost of acquisition; and
(ii)               the value, on the 1st day of June, 2016, of such equity shares as determined in the following manner, namely:

the fair market value of unquoted equity shares =(A+B -L) × (PV),
(PE)
where,

A =book value of all the assets in the balance sheet (other than bullion, jewellery, precious stone, artistic work, shares, securities and immovable property) as reduced by,-(i) any amount of income-tax paid, if any, less the amount of income-tax refund claimed, if any, and (ii) any amount shown as asset including the unamortised amount of deferred expenditure which does not represent the value of any asset;

B=fair market value of bullion, jewellery, precious stone, artistic work, shares, securities and immovable property as determined in the manner provided in this rule;

L=book value of liabilities shown in the balance sheet, but not including the following amounts, namely:—
(i)                 the paid-up capital in respect of equity shares;
(ii)               the amount set apart for payment of dividends on preference shares and equity shares;
(iii)             reserves and surplus, by whatever name called, even if the resulting figure is negative, other than those set apart towards depreciation;
(iv)             any amount representing provision for taxation, other than amount of income-tax paid, if any, less the amount of income-tax claimed as refund, if any, to the extent of the excess over the tax payable with reference to the book profits in accordance with the law applicable thereto;
(v)               any amount representing provisions made for meeting liabilities, other than ascertained liabilities;
(vi)             any amount representing contingent liabilities other than arrears of dividends payable in respect of cumulative preference shares;

PE =total amount of paid up equity share capital as shown in the balance-sheet;

PV=the paid up value of such equity share



(III)            unquoted share and security other than equity share in a company shall be the higher of,—

(i)                 its cost of acquisition; and
(ii)               the price that the share or security 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;


4.    Immovable property- Fair Market Value shall be higher of—

(I)                 its cost of acquisition; and

(II)              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;


5.    Interest in a Firm or an AOP or a LLP-  of which he is a member shall be determined in the manner as specified in clause (6);

6.    The net asset of the firm, association of persons or limited liability partnership on the 1st day of June, 2016 shall first be determined and the portion of the net asset of the firm, association of persons or limited liability partnership as is equal to the amount of its capital shall be allocated among its partners or members in the proportion in which capital has been contributed by them and the residue of the net asset shall be allocated among the partners or members in accordance with the agreement of partnership or association or limited liability partnership for distribution of assets in the event of dissolution of the firm, association or limited liability partnership, or, in the absence of such agreement, in the proportion in which the partners or members are entitled to share profits and the sum total of the amount so allocated to a partner or member shall be treated as the value of the interest of that partner or member in the partnership or association

Explanation— For the purposes of this clause the net asset of the firm, association of persons or limited liability partnership shall be (A + B -L), which shall be determined in the manner provided in sub-clause (II) of clause (3);

7.    Any Other Asset- Valuation of any other asset shall be higher of—

(I)                 its cost of acquisition or the amount invested; and

(II)              the price that the asset would fetch if sold in the open market on the 1st day of June, 2016.

Explanation— For the purposes of this rule,—
(a)    “quoted share or security” in relation to share or security means a share or security quoted on any recognized stock exchange with regularity from time to time, where the quotations of such shares or securities are based on current transaction made in the ordinary course of business;

(b)   “unquoted share and security” in relation to share or security means share or security which is not a quoted share or security
(c) “balance sheet” in relation to any company means the balance sheet of such company (including the notes annexed thereto and forming part of the accounts) as on 31st day of March, 2016, which has been audited by the auditor of the company appointed under the Companies Act, 2013 (18 of 2013) and where the balance sheet as on 31st  day of March, 2016 is not audited, the balance sheet (including the notes annexed thereto and forming part of the accounts) which has been approved and adopted in the annual general meeting of the shareholders of the company

  FAQs on Income Tax Deceleration Scheme 2016

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1 comment:

  1. Income is very high and this is really good for them. Thank you for the recent news.

    ReplyDelete