The Income Declaration Scheme offers tax evaders an opportunity to disclose their unaccounted assets or income. The scheme allows them to rectify their tax errors by paying the applicable taxes, surcharge, and penalty amounting to 45% of overall undisclosed income and start afresh. Since, the Income Declaration Scheme ends this month, in case you fall within the bracket, you should hurry and avail it too.
The year before last was a very fruitful year for Indranil. From earning a substantial amount on the sale of a part of his ancestral property, to making large profits on his newly founded e-commerce venture, Indranil was smiling all the way to the bank. However, that smile turned into a worried frown when he realized that he had missed paying capital gains tax on the amount received on the sale of his inherited property. He was also unaware of the tax compliances that required following for his online business. He had filed his tax returns without accounting for these incomes and gains – and, this amounted to tax evasion.
Like Indranil, have you also failed to disclose your income in the relevant Assessment Year? If yes, the Income Declaration Scheme (IDS), 2016, allows all income tax assessees to file returns for any undisclosed income from the past. As per this scheme:
When you make a declaration under this scheme, you pay income tax amounting to 30% of the total value of your undisclosed income as increased by surcharge at the rate of 25% of such tax. In addition, the declarant is also liable to pay penalty at the rate of 25% of such tax. Thus the declarant is liable to pay 45 percent of the value of the undisclosed income.
The amnesty scheme is helpful for tax payers who have failed to pay their taxes on certain income, or for the assets purchased from such income. Those declaring such unaccounted assets or income are provided immunity from the Income Tax Act of 1961, Benami Transactions (Prohibition) Act, 1988 and Wealth Tax Act.
The relevant tax is to be paid on the basis of the declared value of assets, as per the guidelines issued by the tax department. For example, if you have used undisclosed income towards investments in jewellery, bullion, or precious stones; then the amount to be considered for tax purposes would be the higher of the cost of acquisition and the price that such assets would normally fetch if sold in the open market on June 1, 2016, on the basis of the valuation report provided by a registered valuer. This applies to all other assets including archaeological collections, immovable property, work of art, drawings, etc. as well.
However, the process of calculation is different for shares, securities and other financial assets. The value of shares listed on a recognised stock exchange is the higher of the two costs –
In case of non-listed shares the value will be higher of
You need to avail a certified copy from any registered valuer in accordance to Section 34AB of the Wealth-tax Act after paying the prescribed costs. The ascertained value has to be filled in the tax declaration form. You must remember to retain the certified reports for all assets for future reference.
The filing of the declaration can be done either offline, or online by generating the electronic verification code or using digital signature if you have one. You will get an acknowledgement in Form-2 within 15 days after the expiry of the month, wherein you have filed your declaration. The last day of accessing the income declaration window is 30th September. The amount payable under the Scheme can be paid in instalments viz. 25% of the total amount payable by 30.11.2016; another 25% by 31.3.2017 and balance 50% by 30.9.2017. Once the tax has been paid, it is essential to submit the proof of payment of tax, as well as the penalty to an officer designated for the cause in Form-3. Once you submit the proof of payment of tax, surcharge and penalty to the officer concerned, he will issue you a certificate in Form-4 within 15 days.
To make the correct use of IDS, Indranil worked out the amount of his undisclosed income, and ensured that his assets were valued officially and all relevant taxes calculated accurately. This is because once he had made the payment, these penalties and taxes would not be refunded. Once again, Indranil finds himself smiling all the way to the bank.