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 Government shortly.
Cost-benefit vis-à-vis the Income-tax Act
Please see below a compare of the tax costs involved in making a declaration under this Scheme vis-à-vis the potential risk detection of such undisclosed income/ assets by the Income Tax Department post closure of the Scheme.
Click here to view table.
For further details, please see our Ergo Newsflash Budget (click 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.