Income Declaration Scheme for Financial Year and Assessment year

Income Declaration Scheme for Financial Year and Assessment year
Narendra Modi government has launched an Income Declaration Scheme (IDS) 2016.The scheme gives an opportunity to tax evaders to disclose their unaccounted income or assets, and come out clean by paying the applicable tax, cess and penalty totaling 45% of the undisclosed income. This will help them regularise their wealth. But IDS is also for those who may have unknowingly not paid tax on certain income or assets bought from the income. For instance, one could have missed paying capital gains tax on the money received from sale of an inherited property.

What can be declared under TIDS?

The scheme shall apply to undisclosed income whether in the form of investment in assets or otherwise, pertaining to Financial Year 2015-16 or previous years.
However, foreign assets or income to which the Black Money Act 2015 applies are not eligible for declaration under this scheme.
If one has failed to furnish Income Tax Return of previous years under section 139 of the Income-tax Act, such income can now be declared under this new scheme. (In case if you have received any notices under section 142(1) or 143(2) or 148 or 153A or 153C, your case may not be eligible for this scheme).

IDS scheme & Benefits to the Declarant

No Scrutiny and enquiry under the Income-tax Act or the Wealth tax Act shall be undertaken in respect of such declarations.
Assets specified in the declaration shall be exempt from Wealth tax.
Undisclosed income declared will not affect the completed tax assessments.
Immunity from prosecution.
Amount of income declared under this scheme will not be included in the Total Income of the declarant for any assessment year under the Income Tax Act.

Eligibility Criteria for Income Tax Declaration Scheme:

Section 2(31) of the Income Tax Act specifies which kinds of entities can file tax. These are:

Individual
Hindu Undivided Family
Company
Firm
Association of persons, whether incorporated or not
Local authority
Every artificial juridical person not falling in the above categories

Tax , Surcharge and Penalty under the Scheme:

Tax 30% of Undisclosed Income
Surcharge= Krishi Kalyan Cess 25% of Tax =7.5% of Undisclosed Income
Penalty 25% of Tax =7.5% of Undisclosed Income
Total 45% of Undisclosed Income
Conclusion:
This scheme provides an opportunity to all persons who have not declared income correctly in earlier years or who have not paid full taxes in the past to come forward and declare such undisclosed income.