The Income Declaration Scheme, 2016 (hereinafter referred to as ‘the Scheme’)incorporated as Chapter IX of the Finance Act, 2016 provides an opportunity to personswho have not paid full taxes in the past to come forward and declare the undisclosedincome and pay tax, surcharge and penalty totalling in all 45% of such undisclosed incomedeclared. The Income Declaration Scheme Rules, 2016 (hereinafter referred to as ‘the IDSRules’) have been notified. In this regard, Circular No. 17 of 2016 dated 20th May, 2016 andCircular No. 24 of 2016 dated 27th June, 2016 issued by the Board provided clarifications to 14 and 11 queries respectively. Subsequently, further queries have been received from thepublic about various provisions of the Scheme. The Board has considered the same andthe following clarifications are issued.-
Question No.1: Will the information contained in the declaration be shared withother law enforcement agencies?
Answer: No; the information contained in the declaration shall not be sharedwith any other law enforcement agency. The information will alsonot be shared within the Income Tax Department for anyinvestigation in respect of a valid declaration.
Question No.2: Whether immunity will be provided under other economic lawsincluding Service Tax, VAT, Companies Act, SEBI Act & regulationsetc.?
Answer: The Scheme provides immunity under the Income-tax Act, 1961, theWealth-tax Act, 1957 and the Benami Transactions (Prohibition) Act,1988. Immunity from Benami Transactions (Prohibition) Act is subjectto the condition that the property will be transferred to the declarant(being the person who provided the consideration for the property)latest by 30th September, 2017. However, as mentioned in responseto Question No.1 above, the information contained in the declarationmade under the Scheme will not be shared with any other tax or lawenforcement agency.
Question No.3: Where the value of immovable property determined under Rule 3 ofthe IDS Rules is lower than the value adopted or assessed/assessableby stamp valuation authority referred in section 50C or section 43CAof the Income-tax Act, whether value of such property is to bedeclared as per Rule 3 of the IDS Rules, or as per section 50C/43CA?
Answer: The value of the property for the purposes of declaration in suchcases shall be computed as per Rule 3 of the IDS Rules even if suchvalue is lower that the value adopted or assessed/assessable bystamp valuation authority.
Question No.4: Whether credit for tax deducted, if any, in respect of income declaredshall be allowed?
Answer: Yes; credit for tax deducted shall be allowed only in those caseswhere the related income is declared under the Scheme and the creditfor the tax has not already been claimed in the return of income filefor any assessment year.
Question No.5: Where a valid declaration is made after making valuation as per theprovisions of the Scheme read with IDS Rules and tax, surcharge &penalty as specified in the Scheme have been paid, whether thedepartment will make any enquiry in respect of sources of income,payment of tax, surcharge and penalty?
Question No.6: What is the purpose of obtaining the information about the nature ofundisclosed income in the last column of table at point (I) relating tonature of undisclosed income in Annexure to Form-1?
Answer: The purpose of obtaining information about the nature of undisclosedincome is to know whether the undisclosed income is in the form ofmoveable asset, immovable asset, gold, jewellery or cash. Here, thenature of income need not be confused with the source of income.There is no need to indicate the source of income at all. In the columnmeant for nature of undisclosed income one has to write thenomenclature such as ‘immovable property’, ‘moveable property’,‘gold’, ‘jewellery’ or ‘cash’ etc. This will enable the taxpayer toestablish the link between the income declared under the scheme andthe claim, if any, made in respect of such undisclosed income in thereturn of income filed subsequently or during any assessmentproceedings.
Question No.7: In case the value of immovable property is evidenced by registereddeed, whether the value as per registered deed or the market value ason 01.06.2016 is to be declared?
Answer: As per Rule 3 of the IDS Rules, the fair market value of an immovableproperty shall be the higher of its cost of acquisition and the price thatthe property shall ordinarily fetch if it is sold in the open market as on1st June, 2016. The value mentioned in the registered deed shall berelevant for determining the cost of acquisition and the same can betaken as the fair market value only where it is higher than the pricethat the property shall ordinarily fetch if sold in the open market ason 1st June, 2016.
Question No.8: In case a declaration relating to investment in undisclosed asset ismade under the Scheme, whether any investigation will be initiatedagainst the seller in respect of such declaration?
Question No.9: What are the advantages of the Scheme as against declaring the pastundisclosed income as current income in the return of income to befiled for Assessment Year 2017-18? How will the Department identifythe year in which the undisclosed income was earned.
Answer: In this regard, the following points may be noted:
- Declaration of past undisclosed income in the current yearamounts to false verification of return of income which shallattract prosecution under the Income-tax Act.
- If anyone attempts to disclose past undisclosed income in thecurrent year, he will have to explain the source of income andsubstantiate the manner of earning the said income. In case ofdisclosure under the Scheme, there is no need to explain thesource of income.
- Declaration of past undisclosed income in the current yearcannot explain assets acquired in the past or provide anyimmunity in respect of the same.
- The Income-tax Department is in receipt of large volume ofinformation from various sources such as registrars ofproperty, banks, financial institutions, stock exchanges, taxdeductors etc. The Department has launched a comprehensivedata-mining and compliance management programme in theform of ‘Project Insight’ which will generate a large volume ofreliable information about financial transactions undertaken bytaxpayers and the relevant year in which the transaction wasundertaken.
Question No.10: In a case the declarant earned undisclosed income of Rs. 90 lakh inprevious year 2010-11. Out of the same, he acquired an immovableproperty in the previous year 2011-12 for Rs.50 lakh, made personalexpenditure to the extent of Rs.20 lakh and balance Rs.20 lakh is leftwith him as cash in hand on 01.06.2016. The fair market value of theimmovable property as on 01.06.2016 is Rs.80 lakh. What is theamount to be declared under the Scheme?
Answer: The declarant in this case has to declare the following:
(i) Rs. 80 lakh being fair market value of the immovable propertyas on 01.06.2016
(ii) Rs. 20 lakh being the cash in hand as on 01.06.2016
(iii) Rs. 20 lakh being the balance of undisclosed income [Rs. 90lakh – (Rs.50 lakh + Rs. 20 lakh)] which is not represented inthe form of investment in any asset.
Thus the total undisclosed income to be declared in this case will beRs. 1.20 crore.
Question No.11: A person invested his undisclosed income in a house property in theprevious year 2010-11 which has not been let out. The person alsoowned another house property from disclosed sources, which hasbeen claimed as self-occupied property for the purposes ofcomputation of income under the head income from house property.In case the person declares the undisclosed house property at its fairmarket value on 01.06.2016, whether any action will be taken forbringing the annual value of the undisclosed property to tax asincome from house property by deeming it to be let property asprovided under section 23(4)(b) of the Income-tax Act for the earlierprevious years?
Answer: No. However, where the house property was let-out during therelevant period, the actual rent received or receivable will be requiredto be declared under the Scheme in addition to the fair market valueof the house property as on 01.06.2016