Those under watch ineligible for income declaration scheme

The scheme also shuts out ‘innocent’ taxpayers who filed returns on time but whose cases were chosen for scrutiny to verify claims.

Though the Income Declaration Scheme provides immunity from wealth tax, scrutiny and prosecution and from the Benami Transaction Act, it closes the door on anyone whose income is already part of an assessment, reassessment or survey. File photo

Tax payers, whose returns were picked for random scrutiny by the authorities in recent years, would not be eligible to turn concealed income into ‘white’ under the Income Declaration Scheme (IDS), announced in the Union Budget to bring black money into the tax net. Experts believe this may prove a dampener for the scheme.

Though the scheme provides immunity from wealth tax, scrutiny and prosecution and from the Benami Transaction Act, it closes the door on anyone whose income is already part of an assessment, reassessment or survey, tax experts say.

The scheme also shuts out ‘innocent’ taxpayers who filed returns on time but whose cases were chosen for scrutiny to verify claims. The scheme will be kept open for four months from June 1.

“Such a notice could be an innocent notice bearing no reference to undisclosed income,” said Ganesh Raj, national leader, policy advisory group at EY, who said the government must consider making such taxpayers eligible.

“Usually, many cases, especially of high net worth individuals, are picked up mechanically for scrutiny and notices are issued,” he said, stressing that some notices are issued on the basis of returns filed by the taxpayer, and are not necessarily linked to undisclosed income.

Vivek Mehra, partner, tax and regulatory services at PwC India, agreed with Mr. Raj’s assessment of the scheme.

“This could be a dampener for the scheme as it would exclude potential disclosures from people who received notices seeking a regular explanation on the returns they had filed,” he said.

Union Finance Minister Arun Jaitley has proposed a “limited-period Compliance Window for domestic taxpayers to declare undisclosed income or income represented in the form of any asset and clear up their past tax transgressions” by paying tax at 30 per cent, and Krishi Kalyan surcharge at 7.5 per cent and penalty at 7.5 per cent — a total of 45 per cent of the undisclosed income. Undisclosed income of any financial year up to 2015-16 can be brought overground through this window.

Under the income declaration scheme, people who have received notices under Sections 142 (1), 143 (2), 148, 153A or 153C of the Income Tax Act are not eligible to disclose previously concealed income.

Separately, as per the explanatory memorandum to the budget, it won’t be open to cases “where a search or survey has been conducted and the time for issuance of notice under the relevant provisions of the Act has not expired, or where information is received under an agreement with foreign countries regarding such income, cases covered under the Black Money Act, 2015, or persons notified under Special Court Act, 1992, or cases covered under Indian Penal Code, the Narcotic Drugs and Psychotropic Substances Act, 1985, the Unlawful Activities (Prevention) Act, 1967, and the Prevention of Corruption Act, 1988.”