Vivad se Vishwas -Tax Amnesty Scheme: What, When, How, For Whom.

Every year our Indian Government comes up with amnesty schemes of various taxes. In past years, the government had already launched schemes like Income & Asset Declaration Scheme, Voluntary Disclosure of Income Scheme, Direct Tax Dispute Resolution Scheme 2016, Sabka Vishwas (Legacy Dispute Resolution) Scheme 2019, etc.

Tax amnesty Schemes are the schemes for a short duration for the specified taxes or legal proceedings, where the eligible taxpayers have to pay the prescribed amount of liability in exchange for proper disclosure. Forgiveness of tax liability includes interests and penalties and forego of any legal proceedings.

New Income Tax Rates & existing Income Tax Rates : Quick comparison

On one side it is a relief to taxpayer’s hardships, while on the other side it is a economic and financial strategy by government to clear all the appeals and increase the tax revenue.

About 88000 appeals are pending before Income Tax Appellate Tribunal and about 5 lakh Direct tax disputes involving tax demands of Rs. 9.5 lakh crore are yet to be resolved as of now.

Advance Tax liability : Calculation, Due dates, Interest

To deal with this matter, government has introduced a new direct tax amnesty scheme viz VIVAD SE VISHWAS SCHEME 2020 under the act ‘the Direct Tax Vivad se Vishwas Act, 2020’

This scheme was introduced after the success of the “Sabka Vishwas (Legacy Dispute Resolution) Scheme 2019”, which was introduced to reduce Indirect Tax disputes.

Who can avail?

An Assessee having any appeal pending before Income Tax Appellate Tribunal, Commissioner (Appeals), High Court or Supreme court, in respect of disputed tax/interest/penalty as on or before specified date i.e. 31-01-2020, can opt for this scheme. Search and seizure Cases where the disputed amount is less than Rs. 5 crore in a year.

10 Income Tax Saving Tips for AY 2020-21 : Tax Planning

Also, for Demand orders whose appeal time has not expired as on 31-01-2020 and revision applications pending on or before 31-01-2020, can opt for this scheme.

Who cannot avail?

This scheme is not available to the person having :

1. Assessments under Section 153A/153C of the Income-Tax Act (i.e Search Assessments where demand is for more than Rs. 5 crore )
2. Cases under prosecution. (Prosecution includes any offence, wrongful act, crime)
3. Undisclosed Foreign Income/Assets
4. Assessment related to Section 90 and 90A of the Income-Tax Act (Double Taxation Relief Agreement)
5. Appeals on which Notice u/s 251 (Disposal of appeals) of the Income-Tax Act has been issued.
6. In respect of whom prosecution for any offence punishable under the provisions of
   1. the Indian Penal Code,
   2. the Unlawful Activities (Prevention) Act, 1967,
   3. the Narcotic Drugs and Psychotropic Substances Act, 1985,
   4. the Prevention of Corruption Act, 1988,
   5. the Prevention of Money Laundering Act, 2002,
   6. the Prohibition of Benami Property Transactions Act, 1988
   7. to any person notified under section 3 of the Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992 on or before the filing of declaration.

{the above picture is the summary of the scheme as provided by Income-Tax department on their E-filing Website}

Income Tax on selling of Shares and Securities

How this scheme works?

A. Scheme Availed by Taxpayer on or before 31^st March 2020:

Case 1: Where the disputed amount is Tax+Interest + Penalty –

1. Search cases: Amount payable will be 125% of tax only. [Interest & Penalty will be waived off]
2. Other than Search cases: Amount payable will be 100% of tax only. [Interest & Penalty will be waived off]

Case 2: Where the disputed amount is Interest + Penalty –

For all cases: Amount payable will be 25% of disputed interest and penalty.

Difference between Section 44AD, 44ADA and 44AE of Income Tax Act

B. Scheme Availed by Taxpayer between 1^st April 2020 to 30^th June 2020:

Case 1: Where the disputed amount is Tax+Interest+Penalty –

1. Search cases: Amount payable will be 135% of tax only. [Interest & Penalty will be waived off]
2. Other than Search cases: Amount payable will be 110% of tax only. [Interest & Penalty will be waived off]

Case 2: Where the disputed amount is Interest+Penalty –

For all cases: Amount payable will be 30% of disputed interest & penalty.

Don’t Go Blind When Planning Tax To Be Paid On Your Income

C. Scheme Availed by Tax Department on or before 31^st March 2020:

Case 1: Where the disputed amount is Tax+Interest+Penalty –

1. Search cases: Amount payable will be 62.5% of tax only. [Interest & Penalty will be waived off]
2. Other than Search cases: Amount payable will be 50% of tax only. [Interest & Penalty will be waived off]

Case 2: Where the disputed amount is Interest+Penalty –

For all cases: Amount payable will be 12.5% of disputed interest & penalty.

Advance Tax liability : Calculation, Due dates, Interest

D. Scheme Availed by Tax Department between 1^st April 2020 to 30^th June 2020:

Case 1: Where the disputed amount is Tax+Interest+Penalty –

• Search cases: Amount payable will be 67.5% of tax only. [Interest & Penalty will be waived off]
• Other than Search cases: Amount payable will be 55% of tax only. [Interest & Penalty will be waived off]

Case 2: Where the disputed amount is Interest+Penalty –

For all cases: Amount payable will be 15% of disputed interest & penalty.

Good and Bad of Union Budget 2020 : Detail summary

Benefits of availing the scheme

1. Interest & Penalty waivers ranging from 70% – 100%
2. Tax Waivers in few cases ranging from 32.5% – 50%
3. Taxpayers can even get refunds if the amount payable under this scheme is less than amount already paid before availing this scheme.
4. The main motto of this scheme is to resolve all the disputes without stretching it into further appeals and court visits.
5. This would mean that taxpayers can just pay up the taxes & there could be no more questioning around the unexplained entries in their books.
6. Economic Benefits to government: During the crisis period financial difficulties of taxpayers as well as increased public expenditures may occur. Tax amnesties are considered necessary in order to collect at least some of the tax claims. It also helps relieve the taxpayers, who are unable to pay tax debts, and revive the market.
7. Political benefit: Possibility of tax amnesty may be used by political parties to gain more votes when the next election period is about to come. Determining the scope of the amnesty is a purely a political decision and is in the power of the government.
8. Technical & administrative benefit to department: For resolving existing confusions, defective points of the system and making radical changes on the tax system liquidation of past periods may be necessary. Collection of tax debt from taxpayers in financial difficulties is also tough and administratively lengthy. Tax courts have heavy workload and it takes a long time to collect taxes. Tax amnesty is a simple and effective way of solving these administrative problems.

Income Tax Discussion Forum

The author of above article is Pawan Pande.

Disclaimer:The article or blog or post (by whatever name) in this website is based on the writer’s personal views and interpretation of Act. The writer does not accept any liabilities for any loss or damage of any kind arising out of information and for any actions taken in reliance thereon. 
Also, www.babatax.com and its members do not accept any liability, obligation or responsibility for author’s article and understanding of user.