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There are several instances where people do not declare their income accurately or under-report their income in order to avoid income-tax. With a view to have these people report their incomes and pay taxes, the income tax department conducts raids and scrutinies if a person’s accounts are found suspicious. As an alternative, the government has also brought-in the Income Declaration Scheme, 2016 to provide an opportunity to those who haven’t declared their income properly. The scheme allows a citizen to disclose the undeclared income and pay the applicable taxes.

  1. Who can disclose income & assets under The Income Declaration Scheme 2016 (TIDS)?
  2. Income tax penalty rate
  3. What forms should you deal with?
  4. Immunity for the income declarant
  5. Mode of declaring such income
  6. Example scenario

1. Who can disclose income & assets under The Income Declaration Scheme 2016 (TIDS)?

Citizens who have not declared their income wholly or partially and paid their taxes in full in the past can come forward and declare their undisclosed income/assets. As a result, they have to pay the corresponding taxes, surcharges, and penalties as applicable. To be precise, all citizens including individuals, HUFs, companies, firms, and association of people can disclose income and assets under The Income Declaration Scheme, 2016 (TIDS).

2. Income tax penalty rate

You have to pay a penalty as per the rates given below:

  • Income tax at 30% of undisclosed income.
  • Surcharge at 7.5% of undisclosed income.
  • Penalty at 7.5% of undisclosed income.
  • A total of 45% of the undisclosed income is required to be paid to the government.

    3. What forms should you deal with?

  • Form 1: It is a declaration form to be filled and submitted by the taxpayer within the due date specified i.e., by 30 September 2016.
  • Form 2: Acknowledgement of declaration to be issued within 15 days from the end of the month in which declaration is filled.
  • Form 3: Imitation of payment of tax, surcharge, and penalty must be submitted by the declarant within the specified date i.e., by 30 November 2016.
  • Form 4: Form 4 is the certificate of declaration to be provided by PCIT/CIT within 15 days from the date of intimation of payment.
  • 4. Immunity for the income declarant

  • No enquiry/scrutiny under the Income Tax/Wealth Tax Act with respect to such declarations.
  • No prosecution under the Income Tax/Wealth Tax Act.
  • Immunity from Benami Transactions (Prohibition) Act, 1988.
  • 5. Mode of declaring such income

  • Online through the e-filing portal.
  • Print form: submit to jurisdictional Principal Commissioner or Commissioner of Income Tax.
  • 6. Example scenario

    Consider that Mr V has assisted Mr P for purchasing a residential plot and earned a commission of Rs.3 lakh. However, Mr V has not disclosed this income as the money was received in cash (there is no proof for receiving the money). This incident has happened in 2016. However, his wife wants him to declare this income and be honest with the government.

    She hears about The Income Declaration Scheme, 2016 and persuades Mr V to declare this income so that they can use the money to incubate a startup legally. Mr V agrees to disclose this income and files a declaration online on the income tax india website.

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