Voluntary Income Declaration Scheme of 2016

Ways in which Tax Evasion Affects the Economy of a Nation

Tax evasion causes huge loses to a nation’s economy as it deprives the government of resources which could have been otherwise utilized in undertaking developmental projects or for providing its citizens with the basic needs. When an Indian citizen fails to pay his/her taxes the undesirable burden falls upon all the regular tax payers who are levied with higher taxes to compensate for the revenue crunch.

What are the Key Attributes of Income Declaration Scheme 2016?

• An individual or a company can make only one declaration, even if multiple declarations have been made, only the first declaration will be taken into consideration.
• Fabricated declarations will be considered invalid.
• On timely payment of taxes and penalties after declaration of income/assets, the amount will be considered as disparate from the normal income tax cycle which will not be added to your income in any assessment years.
• If a part of your income or wealth declaration are assets then its fair market value as on June 1, 2016, would be accounted as the undisclosed income.
• Declared assets/income of a firm/company will not be considered while calculating the wealth or income of its partner firms.
• Undisclosed incomes from investments on assets cannot be considered as Benami Transaction Act, if the said asset is transferred to the declarant or their legal representative.
• Declaration under this scheme cannot be used for charging additional penalties and court cases against an individual/firm.
• This declaration should be produced before The Principal Commissioner or Commissioner of Tax within your relevant jurisdiction.

Categorizing Declarant and Eligibility of an Authorized Representative

Section 2(31) of the Income Tax Act identifies certain eligibility criteria for Income Tax Declaration Scheme.

It also categorises the authorized representative for making the declaration on behalf of the claimant on special cases

All these categories of entities can declare for additional income till the assessment year of 2016-17, through Income Declaration Scheme. Taxpayers who have made the declarations would be exempted from inspections, reassessments by the tax authority or from being enquired and prosecuted.

Non-Eligibility Factors for Income Declaration Scheme

• Anyone who have been issued notice under Sections 142(1), 143(2), 148, 153A or 153C (example: those who been served pre-assessment inquiry notice, scrutiny notice, income escaping assessment notice, notice on assessment in case of search or requisition and notice on assessment of income of another person).
• Anyone against whom an ongoing search or survey is being conducted.
• Involvement in cases under the Black Money Act, 2015.
• Person notified under Special Court Act, 1992.
• Involvement in cases under Indian Penal Code, Narcotic Drugs and Psychotropic Substances Act, 1985, Unlawful Activities (Prevention) Act, 1967 or Prevention of Corruption Act, 1988.

The introduction of Income Declaration Scheme is a way of offering pardon to tax defaulters, offering a chance to come forward with the facts. This scheme does not provide complete immunity to defaulters it offers a cut-down on the tax penalties levied upon the defaulters.