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Customer Care No.

91-1145562222

A comparative analysis of
new income declaration
scheme and settlement
scheme
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Amongst the various new schemes and changes brought


about by the Budget, 2016, one of the most talked about
and significant change is Income Declaration Scheme,
2016 (" herein after referred to as "the Scheme" or
"New Scheme" or "Disclosure Scheme, 2016" in the
context in which it is required) . The Scheme which has
come into effect from 1st June, 2016 vide notification
dated 19th May, 2016 is expected to bring about a change
in
the
manner
of
disclosure/declaration
of
undisclosed/undeclared income. The Scheme has been
introduced as a separate chapter, Chapter IX, to Finance
Act, 2016.Further, the government has notified the Income
Declaration Rules, 2016(hereinafter referred as the
Rules)to give effect to various provisions of the Scheme.
Presently, the penal consequences of not disclosing income
(technically speaking concealment or furnishing of
inaccurate particulars of income) are so harsh and rigid
that they may act as a deterrence for the assessee, who
Customer Care No. 91-11might wish to disclose the income, though there may be

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3
Purpose and Scope
The main purpose of the Scheme is to provide an
opportunity to persons who have not paid full taxes in
the past to come forward and declare the undisclosed
income and pay tax. The scope of the Scheme extends
to all assesses (Individual, HUF, Company, Firm, Any
other associations or any other persons). However,
persons who have been served notice under Section
142, or 143(2), or 148 or 153A or 153C of the Income
Tax Act, 1961("the Act" for Short) ,persons notified
under section 3 of Special Court (Trial of Offences
Relating to Transaction in Securities) Act, persons in
respect of whom proceedings under Chapter IX
(offences relating to public servants) and Chapter XII
(offences against property) of Indian Penal Code are
pending, persons accused under Unlawful Activities
(Prevention) Act or the Narcotic Drugs and
Psychotropic Substances Act, or Prevention of
Corruption Act have been kept out of the ambit of this
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Salient Features of the Scheme


The Applicant can declare any income chargeable to tax, which he has failed to disclose earlier for
any AY prior to AY 2017-18 by making declaration in form No. 1.
Where the income chargeable to tax is declared in the form of investment in any asset, the fair
market value of such asset as on 1st June, 2016 computed in accordance with Rule 3 of the Rules
shall be deemed to be the undisclosed income.
Aggregate tax, surcharge and penalty payable on the income disclosed will be 45% of the total
undisclosed income. Tax being 30% of the income, increased by a surcharge of 25% and a penalty
of 25% of such tax thus totalling in all to 45% of the undisclosed income.
Scheme is operation from 01.06.2016 to 30.09.2016 and the last date for payment of tax with
surcharge and penalty is 30.11.2016.
The amount of undisclosed income will not be included in the total income of the declarant under
the provisions of the Act for any assessment year.
Immunity from the Benami Transactions (Prohibition) Act, 1988 shall be available in respect of the
assets disclosed in the declarations subject to the condition that the benamidar shall transfer to
the declarant or his legal representative the asset in respect of which the declaration of
undisclosed income is made on or before 30th September, 2017;

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5
The value of asset declared in the declaration shall not be chargeable to Wealth-tax for any
assessment year or years.
Declaration of undisclosed income will not affect the finality of completed assessment. The
declarant will not be entitled to claim re-assessment of any earlier year or revision of any
order or any benefit or set off or relief in any appeal or proceedings under the Income-tax Act
in respect of declared undisclosed income or any tax, surcharge or penalty paid thereon.
An imminent question that arises is whether there exists any provision(s) under the Act itself
regarding the disclosure of any additional income by the assessee in case he fails to furnish the
same in return filed by him and if the assessee wishes to disclose such income and its source
before the revenue authority?
Indeed there exists such a provision relating to 'settlement of case' contained in Chapter XIX- A
of the Act, which relates to settlement of case pending in case of an assessee, with condition
precedents being full and true disclosure of his income, payment of additional tax etc., on or
before the date of making application u/s 245C of the Act.
This article is a humble attempt at making a comparative analysis between the scheme
regarding the settlement of case and the new Disclosure Scheme, 2016 and drawing distinctions
Customer
No. 91-11www.taxmann.com
betweenCare
the two.

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Customer Care No. 91-11-

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