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4-month compliance window to declare undisclosed income

Such taxpayers can clear their past tax transgressions by paying tax of 30%, a surcharge at 7.5%, and penalty at 7.5%; which is a total of 45% of the undisclosed income

The finance minister has proposed a 120-day compliance window for domestic taxpayers to declare undisclosed income or assets. These taxpayers can clear their past tax transgressions by paying tax of 30%, a surcharge at 7.5%, and penalty at 7.5%; which is a total of 45% of the undisclosed income. The surcharge levied at 7.5% of undisclosed income will be called Krishi Kalyan surcharge.

The compliance window will be open from 1 June to 30 September this year, along with an option to pay the amount due within two months of declaration under the Income Disclosure Scheme (IDS).

The finance minister also clarified that there will be no scrutiny or enquiry regarding income declared in these declarations under the Income-tax Act, 1961 or the Wealth Tax Act, 1957, and that these declarants will have immunity from prosecution. There is also immunity from Benami Transaction (Prohibition) Act, 1988 is also proposed subject to certain conditions.

“This is a good opportunity to come clean. You can still hold the remaining 55% of your income which you haven’t declared instead of going through stringent scrutiny. Whether people will come forward to declare their undisclosed income depends on how deep the risk is and personal choice," said Neha Malhotra, executive director, Nangia & Co, a chartered accountancy firm.

However, this is not the first time that government has introduced such a scheme. “This seems to be similar to what the government had legislated in 1997, as the Voluntary Disclosure of Income Scheme (VDIS). Like VDIS, the IDS discriminates between law abiding and other taxpayers, and like the earlier scheme, its acceptability in attracting higher tax declarations remains circumspect," said Naveen Aggarwal , partner-tax, KPMG in India.

The government had earlier provided a 90-day compliance window for those with undeclared foreign assets, which closed on 30 September 2015. During this window, those who had not declared their foreign assets got an opportunity to disclose details and escape the stringent provisions under the black money law. They had to pay a penalty of 30% and a tax of 30%, which totalled 60% of the undisclosed income.

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