Following the voluntary disclosure window under the Black Money
(Undisclosed Foreign Income and Assets) and Imposition of Tax Act,
2015 (Foreign Black Money Law), the Government of India had
announced the Income Declaration Scheme, 2016 (Scheme) in the
Finance Bill, 2016. The Scheme was announced with the intention of
attracting taxpayers to disclose their unaccounted domestic /
Indian income and assets.
As per the Press Release issued by the Ministry of Finance,
Government of India on 14 May 2016, the Scheme will remain open for
four months from 1 June 2016 to 30 September 2016.
Broad mechanics of the Scheme
The Scheme applies to undisclosed / unaccounted domestic income
and assets which were earned in any year prior to the financial
year (FY) 2016-17 (i.e. FY 2015-16 and earlier years). The Scheme
does not apply to any undisclosed foreign income and assets to
which the Foreign Black Money Law applies.
Taxpayers can submit their declaration of the domestic
undisclosed / unaccounted income and assets (online or with the
jurisdictional Principal Commissioner of Income-tax) within the
time period when the Scheme remains in force. A valid declaration
made under the Scheme would protect the declarants from: (i) the
rigours of Benami Transactions (Prohibition) Act, 1957; (ii)
scrutiny, enquiry and prosecution under the Income-tax Act, 1961
and Wealth Tax Act.
Specific rules and forms for making the declaration (including
the rules for valuation of assets, etc.) will be notified by the
Cost-benefit vis-ŕ-vis the Income-tax Act
Please see below a compare of the tax costs involved in making a
declaration under this Scheme vis-ŕ-vis the potential risk
detection of such undisclosed income/ assets by the Income Tax
Department post closure of the Scheme.
under the Scheme
the Income-tax Act, 1961 and rules
30% (plus surcharge in
the nature of Krishi Kalyan Cess of 7.5%)
30% (plus applicable
surcharge and education cess of 3%)
1% for every month or
part of the month starting from the year in which income was
25% of the tax (i.e.
7.5% of the value of income / assets declared)
Potentially 100% to 300%
of the tax amount
45% of the
income / assets declared
120% (i.e. tax
plus penalty) plus applicable interest
For further details, please see our Ergo Newsflash
here) where this Scheme was introduced by the Government (page
13 for discussions on the Scheme).
A detailed Ergo Newsflash will follow once the rules and further
details of the Scheme are notified by the CBDT.
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