IDS 2016 – A BONANZA FOR TAX EVADERS (PART-1)
Under the Income Disclosure Scheme 2016, domestic taxpayers may declare undisclosed income or income represented in the form of any asset in India and clear up their past tax transgressions by paying tax at 30%, surcharge at 7.5% and penalty at 7.5%, which is a total of 45% of the undisclosed income. The scheme promises immunity by exempting declared assets from Wealth Tax, scrutiny/enquiry and prosecution under Income Tax Act/Wealth Tax Act, and immunity from Benami Transactions (Prohibition) Act, 1988. In the initial stages of
the Scheme, the honourable Finance Minister was at pains to argue that “it is not a VDIS (Voluntary Disclosure of Income Scheme) and it is not an amnesty.
Inequality arises in amnesty, that on a certain income, you as an honest tax-payer have paid 30% and you come after 20 years and say that I would also pay 30%. This is not structured that way. You pay 30% tax and 7.5% surcharge, and another 7.5% penalty, which is 45%, ending up paying 1.5 times more. So, you are paying penalties for not paying tax in time.
“Let us now examine how the Finance Minister did not remain true to his words and how he transformed the Scheme into a bonanza for tax-evaders and anti-social elements. He achieved this objective by way of amending the scheme time and again without application of mind and without taking into account the consequences that would follow in the wake of these amendments. Earlier the tax, surcharge and penalty under the scheme were required to be paid by November 30, 2016. Subsequently, the government extended the deadline for payment of tax, surcharge and penalty and allowed the declarant to pay the amount in three installments by September 30, 2017.
The first installment of 25 per cent is now to be paid by November 30, 2016, followed by another 25 per cent by March 31, 2016. The remaining amount is to be paid by September 30, 2017. Let us assume a net return of 15 per on the declared income under the scheme. Thus, if the return on the declared amount is taken into account, the amendment effectively reduced the payment liability by 15 per cent of the declared income under the IDS. This amounts to providing benefits through back-door and reducing tax liability of dishonest taxpayers vis-a-vis the honest ones.
By Vimlesh Kumar