The Income Declaration Scheme, 2016, comes into force from June 1, 2016 providing a 4-month opportunity for domestic black money holders to come clean by paying 45 per cent of the undisclosed income to tax authorities.
Should you avail of the opportunity and if so, what are the preparations you need to undertake before approaching the authorities?
“Tax evaders surely have an incentive in filing the declaration, since, if they are caught later they would be liable to pay 30 per cent tax plus interest, and penalty, which may add up to be way above the tax evaded money or assets acquired therefrom,” says Neha Malhotra, Executive Director, Nangia & Co.
Suresh Surana, Founder, RSM Consulting Group agrees. “The Income-tax Act provides for steep penalty for concealment which can be as high as 3 times the tax involved and prosecution with rigorous imprisonment up to 7 years. Due to increased transparency resulting from on-line filing of returns, requirement of PAN for most transactions, digitization of land records, sharing of information between government agencies such as VAT/customs/income-tax/RBI, the authorities are geared far more effectively to unearth undisclosed income or assets.
So if you are one of those black money holders willing to avail the government’s offer, here are the first few steps Suresh Surana of RSM Consulting and Neha Malhotra of Nangia & Co advise you to take.
-List down the income on which taxes have not been paid and the assets acquired there from
-After checking whether there is an undisclosed asset requiring disclosure, be sure that the income does not fall under the disqualification criteria listed. For example, the scheme is not applicable in cases where a search or survey has taken place or where a notice has been issued under section 148 for income escaping assessment or under section 143(2) or 142(1) for scrutiny of tax returns.
-Determine the market value of the assets as on the date of the scheme June 1, 2016, which shall be the base for the purpose of computing the tax under the scheme
-Compute the tax @45 per cent in case other options are more attractive, carry out a comparative evaluation.