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FAQs on The Income Tax Declaration Scheme, 2016

FAQs

Circular No.17 of 2016

Question No.1: Where an undisclosed income in the form of investment in asset is declared under the Scheme and tax, surcharge and penalty is paid on the fair market value of the asset as on 01.06.2016,then will the declarant be liable for capital gains on sale of such asset in the future? If yes, then how will the capital gains in such case be computed?

Answer: Yes, the declarant will be liable for capital gains under the Income-tax Act on sale of such asset in future. As per the current provisions of the Income-tax Act, the capital gains is computed by deducting cost of acquisition from the sale price. However, since the asset will be taxed at its fair market value the cost of acquisition for the purpose of Capital Gains shall be the fair market value as on 01.06.2016 and the period of holding shall start from the said date(i.e. the date of determination of fair market value for the purposes of the Scheme)

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Question No.2: Where a notice under section 142(1)/ 143(2)/ 148/ 153A/ 153C of the Income-tax Act has been issued to a person for an assessment year will he be ineligible from making a declaration under the Scheme?

Answer: The person will only be ineligible from declaration for those assessment years for which a notice under section142(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 above referred sections has been issued.

Question No.3 :As per the Scheme, declaration cannot be made where an undisclosed asset has been acquired during any previous year relevant to an assessment year for which a notice under section 142, 143(2), 148, 153A or 153C of the Income-tax Act has been issued. If the notice has been issued but not served on the declarant then how will he come to know whether the notice has been issued?

Answer: The declarant will not be eligible for declaration under the Scheme where the undisclosed income relates to the assessment year where a notice under section 142, 143(2), 148, 153A or 153C of the Income-tax Act has been issued and served on the declarant on or before 31stday of May, 2016. The declarant is required to file a declaration regarding receipt of any such notice in Form-1.

Question No.4:In a case where the undisclosed income is represented in the form of investment in asset and such asset is partly from income that has been assessed to tax earlier, then what shall be the method of computation of undisclosed income represented by such undisclosed asset for the purposes of the Scheme?

Answer: As per sub-rule (2) of rule 3 of the Income Declaration Scheme Rules, 2016, where investment in any asset is partly from an income which has been assessed to tax, the undisclosed income represented in form of such asset will be the fair market value of the asset determined in accordance with sub-rule (1)of rule 3asreduced by an amount which bears to the value of the asset as on the 1.6.2016, the same proportion as the assessed income bears to the total cost of the asset.

This is illustrated by an example as under: Investment in acquisition of asset in previous year 2013-14 is of Rs.500 out of which Rs.200 relates to income assessed to tax in A.Y. 2012-13 and Rs.300 is from undisclosed income pertaining to previous year 2013-14. The fair market value of the asset as on 01.06.2016 is Rs.1500. The undisclosed income represented by this asset under the scheme shall be: 1500 minus (1500 X 200) =Rs.900

500

Question No. 5 :Can a declaration be made of undisclosed income which has been assessed to tax and the case is pending before an Appellate Authority?

Answer: As per section 189 of the Finance Act, 2016, the declarant is not entitled to re-open any assessment or reassessment made under the Income-tax Act. Therefore, he is not entitled to avail the tax compliance in respect of such income. However, he can declare other undisclosed income for the said assessment year which has not been assessed under the Income-tax Act.

Question No.6: Can a person against whom a search/ survey operation has been initiated file declaration under the Scheme?

Answer:(a) The person is not eligible to make a declaration under the Scheme if a search has been initiated and the time for issuance of notice under section 153A has not expired, even if such notice for the relevant assessment year has not been issued. In this case, however, the person is eligible to file a declaration in respect of an undisclosed income in relation to an assessment year which is prior to assessment years relevant for the purpose of notice under section 153A.

(b) In case of survey operation the person is barred from making a declaration under the Scheme in respect of an undisclosed income in which the survey was conducted. The person is, however, eligible to make a declaration in respect of an undisclosed income of any other previous year.

Question No. 7: Where a search/ survey operation was conducted and the assessment has been completed but certain income was neither disclosed nor assessed, then whether such un assessed income can be declared under the Scheme?

Answer: Yes, such undisclosed income can be declared under the Scheme.

Question No.8: What are the consequences if no declaration under the Schemeis made in respect of undisclosed income prior to the commencement of the Scheme?

Answer: As per section 197(c) of the Finance Act, 2016, where any income has accrued or arisen or received or any asset has been acquired out of such income prior to the commencement of the Scheme and no declaration is made under the Scheme, then such income shall be deemed to have been accrued, arisen or received or the value of the asset acquired out of such income shall be deemed to have been acquired in the year in which a notice under section 142/143(2)/148/153A/153C is issued by the Assessing Officer and the provisions of the Income-tax Act shall apply accordingly.

Question No.9: If a declaration of undisclosed income is made under the Scheme and the same was found ineligible due to the reasons listed in section 196 of the Finance Act, 2016, then will the person be liable for consequences under section 197(c)of the Finance Act, 2016?

Answer: In respect of such undisclosed income which has been duly declared in good faith but not found eligible, then such income shall not be hit by section 197(c)of the Finance Act, 2016. However, such undisclosed income may be assessed under the normal provisions of the Income-tax Act, 1961

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Question No.10: If a person declares only a part of his undisclosed income under the Scheme, then will he get immunity under the Scheme in respect of the part income declared?

Answer: It is expected that one should declare all his undisclosed income. However, in such a case the person will get immunity as per the provisions of the Scheme in respect of the undisclosed income declared under the Scheme and no immunity will be available in respect of the undisclosed income which is not declared.

Question No.11: Can a person declare under the Scheme his undisclosed income which has been acquired from money earned through corruption?

Answer: No. As per section 196(b)of the Finance Act,2016,the Scheme shall not apply, inter-alia, in relation to prosecution of any offence punishable under the Prevention of Corruption Act, 1988. Therefore, declaration of such undisclosed income cannot be made under the Scheme. However, if such a declaration is made and in an event it is found that the income represented money earned through corruption it would amount to misrepresentation of facts and the declaration shall be void under section 193of the Finance Act, 2016. If a declaration is held as void, the provisions of the Income-tax Act shall apply in respect of such income as they apply in relation to any other undisclosed income

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Question No.12: Whether at the time of declaration under the Scheme, will the Principal Commissioner/Commissioner do any enquiry in respect of the declaration made?

Answer : After the declaration is made the Principal Commissioner/ Commissioner will enquire whether any proceeding under section 142(1)/143(2)/148/153A/153Cis 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.

Question No.13: Will the declarations made under the Scheme be kept confidential?

Answer: The Scheme incorporates the provisions of section 138 of the Income-tax Act relating to disclosure of information in respect of assessees. Therefore, the information in respect of declaration made is confidential as in the case of return of income filed by assessees.

 Question No.14: Is it necessary to file a valuation report of an undisclosed income represented in the form of investment in asset along with the declaration under the Scheme?

Answer: It is not mandatory to file the valuation report of the undisclosed income represented in the form of investment in asset along with the declaration. However, the declarant should have the valuation report. While e-filing the declaration on the departmental website a facility for uploading the documents will be available

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.

No Extention of Due Date for E filing Tax Audit Reports and Income Tax Returns

Since the last date for filing Income Tax return is finally over, all the Tax Practitioners  has started Efiling the Tax Audit Report and Income Tax returns of Audited as well as company form of Tax Payers. Rumors has already been running nation wide that Last date of filing Income Tax Returns for these Tax Payers will increase to 31st October or 30th November. Due to which many Income Tax payers who are required to get Tax Audit done can be seen relaxing. But today Ministry of Finance has issued some bad news for them.  Ministry of Finance has recently issued Press Release in which it has clearly mentioned that:

"No Extension of Date for Filing of Returns due by 30th September for Assessment Year 2015-16 for Certain Categories of Assessees Including Companies, and Firms and, Individuals Engaged in Proprietary Business/Profession etc whose Accounts are required to be Audited; Taxpayers are Advised to file their Returns Well in Time to Avoid Last Minute Rush "

Income Tax Return Filing Dates Extended to 7th September (All Taxpayers)

Last date for filing Income Tax Return for AY 2015-2016 was extended earlier to 31st August from 31st July 2015. After the end of due date CBDT has been receiving a lot of representations from various groups regarding hardships faced in filing of Income Tax Returns. The dates were Increased for Gujarat recently but nothing was done for Other states taxpayers. After a lot of representations CBDT has finally increased the due date for filing the Income Tax Returns for AY 2015-2016 to 7th September, 2015.

Efiling of ITR 6 and ITR 7 is Enabled

Income Tax Department has recently notified ITR Forms for AY 2015-2016 for filing manually to Income Tax Department. Department has also issued Utility for Efiling of these ITR1, ITR2, ITR3, ITR4, ITR4S and ITR5 till now and same has also been enabled at Income Tax Website for Efiling. To read our Updates regarding these forms please click on below mentioned links:

• Efiling of ITR 3, ITR 4 and ITR 7 Now Available
• Income Tax AY 2015-2016- ITR 3, ITR 4, ITR 5, ITR 6 and ITR 7 notified
• Efiling ITR-2 and ITR 2-A now Available
• Efiling of ITR 1 and ITR 4S AY 2015-2016 now Available

10 Changes in Income Tax Return Forms for the Assessment Year 2015-2016

Recently Income Tax Department has issued new ITR forms for Assessment Year 2015-2016. These new forms are also available at efiling portal for Efiling Income Tax Returns. As the last dates for filing these forms are coming close, we have come with our Another list- 10 Changes in Income Tax Return for the Assessment Year 2015-2016.

Most of us rely on Income Tax Return preparation Softwares to Efile Income Tax Returns. We feed the details and software provide us with the Computation, missing data and errors in our XML file and we finalize our Income Tax Return. But have we ever wondered, if the rules used by the software companies are not correct. What will happen then? The answer is coming to us regularly these days in the form of Notice of Defective returns under section 139(9) or wrong processing of the returns under section 143(1). To save oneself and clients we should always look the manual copy of return before efiling it and also try to read the XML file (if possible). Here we are giving 10 things that has changed in ITR this assessment year and we should check it before filing the Income Tax Returns.

Efiling of ITR 3, ITR 4 and ITR 7 Now Available

As the last date to Efiling the Income Tax returns for Non Audited as well as Audited Income Tax Returns are coming close, Income Tax Department is in huge pressure to issue the relevant forms and Utility for accepting the returns.Two days ago we have updated our readers with the notification where by which Income Tax Department has notified the new ITR Forms ITR3, ITR 4, ITR5, ITR 6 and ITR 7. To read the full notification click on below mentioned link:

Income Tax AY 2015-2016- ITR 3, ITR 4, ITR 5, ITR 6 and ITR 7 notified

Income Tax AY 2015-2016- ITR 3, ITR 4, ITR 5, ITR 6 and ITR 7 notified

The wait is finally over, ITR 3, ITR 4, ITR 5, ITR 6 and ITR 7 has been notified by the Income Tax Department for AY 2015-2016. After waiting for approximately 4 months since the start of the Assessment year, Income Tax has finally given the new ITR forms from ITR 3 on wards.

Income Tax Department has already notified the ITR 1, ITR 2, ITR 2A and ITR 4S earlier this month. To read the News of the same click on below mentioned link:

Efiling ITR-2 and ITR 2-A now Available

Efiling of ITR 1 and ITR 4S for AY 2015-2016 now Available

The new forms will be available for Efiling shortly, till than the Tax Payers and Professionals can take as overview of the form and prepare themselves and their clients for the same. The full notification regarding the new forms is given below:

Steps to Link Income Tax Efiling with Adhaar for E-Verification of Return

As we all are aware that from this year onwards E-Verification of Return has been started by the Income Tax Department which will enable ITR V free Income Tax Return Filing. This will help in Efiling Income Tax Return without sending the ITR V to CPC Bangalore. Income Tax Department has started EVC filing and has also laid down the steps to be followed by an assessee to file ITR V free Income Tax Returns.

Below are the three ways through which the Income Tax Return can be filed:

1 e-Verification while uploading a return (Non -NetBanking) 

2 e-Verification of an already uploaded return (Non -NetBanking)

3 e-Verification while uploading a return through NetBanking Login

Digitally Signing of Invoices Service Tax and Excise

In today's era of digitization, more and more Small and Medium Enterprises are moving Online. There are more use of Computers, internet, ERP Softwares, Online Billing etc. than it was before. Businessmen are using all sorts of new technologies which will save their time and efforts, one of such technology is of Online Invoice printing and signing. Many of the software provider are  providing these facilities and it saves a lot of time especially of those enterprises where there are more than hundreds of billing everyday. Use of Digital signature is gaining a lot of popularity and as the people are getting educated about the advantages of the system, they are getting inclined towards it.

 Digital signature certificates comes in 3 classes i.e. Class I, Class II and Class III. The Information Technology Act has made the DSC signing at par with manual signing. Income Tax, Sales Tax, Company Law, all are making Digital Signing mandatory and so the Central Board of Excise and customs. Central Board of Excise and Customs with its latest Notification No. No.  18/2015-Central Excise (N.T.) has issued procedure and safeguards to be followed if the Tax payer wants to issue invoices in Digital form with Digital Signature.

Now a Taxpayer can Digitally sign the Invoices issued to there clients and customers. The salient features and procedure for getting the assesse power of Digital Signing is given below:

All You need to know about Black Money Disclosure Scheme

During the presentation of Union Budget 2015-2016, Finance Minister Shri Arun Jaitely Ji, has announced the scheme of rigorous taxes and penalties on those who have Foreign Undisclosed Income and Assets. An act was made to provide the scope, taxation and penalties on Black money in Foreign. The Act was given assent by the President on 26th May, 2015 and is called BLACK MONEY (UNDISCLOSED FOREIGN INCOME AND ASSETS) AND IMPOSITION OF TAX ACT, 2015.

How to Claim Income Tax Refund of Earlier Years

In India, most of us still file Income Tax Returns just to claim refunds of Taxes which are deducted by the payer of our Income i.e. Banks, Governments, Insurance Companies etc or taxes paid extra by us either at the time of Self Assessment or Advance. These taxes are refunded after filing of Income Tax returns.Now most of us even being well educated forget to file the Income Tax return or we don't have knowledge of the process to get the Income Tax refund. Many of the cases are still pending and there are a lot of persons who have refund of Lakhs of rupees but are not being able to get the refund due to non filing of Income Tax returns.

Efiling ITR-2 and ITR 2-A now Available

We have recently provided the news that Efiling of ITR-1 and ITR-4S for the AY 2015-2016 has been started by the Income Tax Department, those who have missed the update can read it from following link: http://www.casamachar.com/2015/06/efiling-of-income-tax-return-for-ay.html.

Eligibility Norms for Chartered Accountants to Conduct Audit under Income Tax Act

As the due date for Audit u/s 44AB and Other Audit under Income tax is coming near, many of us are waiting for the schema and forms to file the Tax audit reports to the Income Tax Department. In most of the cases the Audit are already completed. We would like to bring this to the notice of our fellow Chartered Accountants that the Finance Act 2015 has changed the definition of  "Accountants" and has put some restrictions on Chartered Accountants to carry on Audit/attestation/certification for certain types of assessee. The Chartered Accountants will not be allowed to provide the services other than representation services to these assessee.

Efiling of Income Tax Return for AY 2015-2016 now Available

Income Tax Department has launched the Efiling Utility of ITR 1 and ITR 4S today on, 23rd of June, 2015. The schema for ITR 2 and 2A will be made available shortly.  The amended ITR forms are also available for downloading at the Income Tax Website.


To download the schema, visit the below mentioned link:

https://incometaxindiaefiling.gov.in/e-Filing/Services/DownloadSchemas.html

Below is the communication from Income Tax Department regarding new Income Tax Efiling Schema:

New Amended ITR Forms notified by Income Tax Departement for AY 2015-2016

CBDT via its Notification No. 49/2015/ F.No.142/1/2015-TPL has notified amended ITR Forms Sahaj ITR 1, ITR-2, ITR-2A and Sugam ITR-4S.

The forms can be downloaded from:

http://www.incometaxindia.gov.in/Pages/downloads/income-tax-return.aspx

Full Notification as Issued by Income Tax Department for new ITR Forms is given below for the reference:

Service Tax to remain 12.36% till Notified Date is announced

With the Presidents assent on Finance Act, 2015 on 14th May 2015, various Service Providers have started charging 14% Service Tax. We would like to bring this to notice of our readers that the rate will remain 12.36% till the date declared in the notification.

The relevant portion of Finance Act, 2015 is given below:

In section 66B of the 1994 Act, with effect from such date as the Central Government may, by notification in the Official Gazette, appoint, for the words “twelve per cent.”, the words fourteen per cent.” shall be substituted.

The notification will be available soon and till then rates of 12.36% is to be charged and not 14%. Also the Swach Bharat cess of 2% is to be charged only after the date notified and not from 14th May, 2015.

Service Tax Rate will remain 12.36%

As we all are aware that in the Budget 2015, Finance Minister Shri Arun Jaitely Ji have announced the increase in rate of Service Tax from 12.36% to 14%. There is news all around that from 1st April all the Services will become costly. But in reality nothing will be costly now but after enactment of Finance Bill, 2015.

Yes, you read it correct. There will be no hike in rate of Service Tax from Today but it will be increased only after enactment of Service Tax Act. In this regard relevant portion of D.O.F. No.334/5/2015-TRU dated 28th February 2015 is produced below:

“3.3 The Service Tax rate shall come into effect from a date to be notified by the Central Government after the enactment of the Finance Bill, 2015”.