In a bid to reduce the taxation burden, have you been stowing away a part of your earnings bit by bit, leading to a whole pile going undeclared over a period? It is time to draw out the curtains you had pulled to shield this discrete income from the eyes of the taxman.
The Prime Minister Narendar Modi in his latest ‘Mann Ki Baat’ address to the nation has warned, “Get rid of the burden. Make use of the window of opportunity and declare undisclosed income before September 30, 2016, to guard yourself from the troubles that would follow after the window closes.”
The window of opportunity that the he has been referring to is the actually the Income Declaration Scheme, 2016 introduced as Chapter IX of the Finance Act 2016 which has been thrown open for a four-month period on June 1, 2016.
Income Declaration Scheme is an opportunity for domestic tax payers similar to the declaration of foreign assets or income opportunity offered under the Black Money Act, 2015.
Voluntary declaration of undisclosed income during this period has several benefits including the rate of tax and penalty The Prime Minister reiterated the provisions of the Act providing immunity to the person declaring undisclosed income. “I too have promised that the one who voluntarily comes clean about his/her undisclosed assets using this golden opportunity wouldn’t be questioned about the source of income and would be protected from scrutiny,” he said in his famed Mann Ki Baat address.
The declarants will have immunity from prosecution, from provisions of Benami Transaction (Prohibition) Act, 1988, subject to certain conditions and would also be protected from scrutiny or enquiry regarding income declared in these declarations under the Income Tax Act or the Wealth Tax Act.
Those who fail to use this scheme and are later caught evading income for previous years would face other severe penal consequences accordingly, state the provisions.
On the other hand, eligible persons divulging the income under the Income Declaration Scheme, would be taxed at the rate of 30% plus a ‘Krishi Kalyan Cess’ of 25% on the taxes payable (i.e. 7.5% on the income amount) and a penalty at the rate of 25% of the taxes payable (i.e. 7.5% on the income amount), thereby totaling to 45% of the income declared under the scheme.
These declarations can be filed online or with the jurisdictional Principal Commissioners of Income-tax across the country. Though the declaration can be made before September 30, 2016, payments towards taxes, surcharge and penalty need to be made latest by November 30, 2016.
If the undisclosed income relates to the assessment year where you were served a notice under section 142, 143(2), 148, 153A or 153C of the Income-tax Act before 31 May 2016, then such a taxpayer would not be able to declare income under the Scheme.
If you had been thinking of giving the September 2016 deadline a miss and declaring the assets in your regular tax return, then think again. The income Tax department has warned that the comprehensive data-mining programme can help them trace information about transactions undertaken by the taxpayer and the year to which the same relate. “Declaration of undisclosed income and assets as current income for Assessment Year 2017-18 would attract prosecution for false verification and also cannot explain acquisition of undisclosed assets in the past years,” stated a circular issued on June 30, 2016.