Avail Income Disclosure Scheme, 2016; Or Pay A Hefty Price
Jul 20, 2016

Author: PersonalFN Content & Research Team

Those who spend huge sums yet pay too little tax will soon have to do some self-introspection. The confidence with which such people spend is incredible. Here comes the bolt from the blue—the income tax department has identified 9 lakh such citizens across the country. The Central Board of Direct Taxes (CBDT) plans to approach these people, calling their bluff. Tax officials will also hold up a mirror and nudge them to avail of the window that the Government has provided to declare black money. The CBDT is getting serious about its business.

What’s the scheme?
The Government had introduced a scheme in the Budget session—Income Disclosure Scheme (IDS), 2016, with a deadline set for September 30, 2016. Without getting much into nitty gritty, let’s understand what the scheme is all about. The Government has given a chance to all tax evaders and/or even to innocent tax payers to disclose their income and regularise their assets created by the undeclared portion of their earnings. On the disclosed amount, the assessees will have to pay 45% tax--inclusive of base tax, cess, and penalty. For doing so, the Government of India will grant them immunity from prosecution under Income Tax Act or Wealth Tax Act.

But here’s the catch...
IDS doesn’t talk about providing complete and unconditional immunity. It has put a condition of providing protection against proceedings under the Income Tax Act. So, if a person has earned income by violating other laws, he/she can still be grilled under the Act.

The disturbing fact is that among those 9 lakh unscrupulous spenders the taxmen have identified, there are nearly 1 lakh people who spend more than Rs 1 crore every year, dodging their tax dues. The scheme has started in on June 1, 2016, and we are currently in mid-July. This means the half-time window has already elapsed, yet they are unmoved to come clean. This highlights another fact that, these people must be aware that they can be interrogated under another Act, if not the Income Tax and Wealth Tax Acts. In other words, these 1 lakh people are shamelessly waiting for the Government to announce blanket immunity someday when they can finally paint their black vaults white. This is a round I. In round II, the Income Tax department aims to send notices to those who spend at least Rs 50 lakh a year (dodging tax).

Low response to IDS is quite telling...
Let’s remember one more thing. When the scheme was announced, it was voluntary in nature. The tax department is moving step-by-step. For the first 45 days since the scheme went live, the CBDT did nothing. They just gathered data and remained silent. Now they are making their intent clear. This may also be a hint that, the scheme hasn’t gathered as much response as the Government had anticipated. The next step would be even tougher. The window of IDS, 2016 closes on September 30, 2016, this could be a dead-end for tax evaders. Beware! You might spend with your eyes closed, but taxmen are watching you with hawk eyes.

Heads, tax department wins; tails, tax evaders lose. To avoid being in an embarrassing situation, PersonalFN always tells its readers to pay all tax dues and file returns in time. If you love money; get serious, investors. However, you are responsible for how your wealth is created, invested, and spent. Those who want to increase their wealth by working hard and getting serious about their financial management, PersonalFN has a bouquet of products to offer—from research services to financial planning solutions.