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
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