Saturday, April 1, 2017

Voluntary disclosure scheme under Sec. 115BBE - 20 things to know

Voluntary disclosure scheme under Sec. 115BBE - 20 things to know

1.Voluntary disclosure of undisclosed income by assessee enabled by disclosure in a return filed under section 139.
2.Tax rate increased from 30% to 60% with effect from assessment year 2017-18. Cess of 25% is introduced, also with education cess. Effective rate shall be 77.25%.
3.Voluntary disclosure scheme under section 115BBE has no expiry date. It will be an "On-Tap Scheme" from assessment year 2017-18 unless in future section 115BBE is amended again to prohibit voluntary disclosure.
4.Voluntary disclosure must be accompanied by deposit of 77.25% of the undisclosed income on or before the end of the relevant previous year. Relevant previous year means previous year in the return of which voluntary disclosure is intended to be made. If tax is not deposited by the end of previous year (i.e., by 31-3-2017, in case of current financial year, ending on 31-3-2017), penalty @ 6% [10% of 60% tax rate stated in section 115BBE(1)(i)] will apply, taking the effective tax rate to 83.25%.
5.No deduction in respect of any expenditure or allowance or set off of any loss shall be allowed to the assessee under any provision of this Act in computing his income referred to in section 115BBE(1)(a).
6.Voluntary disclosure should be made before any notice is issued by the Department or before any search or seizure is carried out. This is important as disclosure has to be in a return filed under section 139 be it original return or revised return or belated return.
7.If voluntary disclosure is not made and undisclosed income is detected in scrutiny assessment or reassessment or through survey (i.e., any manner other than search), then penalty @ 6% [10% of 60% tax rate stated in section 115BBE(1)(i)] will apply under proposed new section 271AAC, taking the effective burden to 83.25% of the undisclosed income.
8.Filing of return in response to notice under section 142 or after survey is conducted will not be regarded as voluntary disclosure. Nor will disclosure in any return filed under section 148 be regarded as voluntary disclosure. In such a case assessee will be able to avail section 115BBE with penalty @ 6% [10% of 60% tax rate stated in section 115BBE(1)(i)].
9.If undisclosed income is detected in any search which takes place on or after the date the Bill receives Presidential Assent, then penalty of 30% or 60% will be levied under proposed new sub-section (1A) of section 271AAB taking the effective rate to 107.975% or 137.975%.
10.If undisclosed income is detected in any search which takes place before the date of Presidential Assent, then, penalty of 10% or 20% or 30% to 90% will be levied, taking the effective tax rate to 87.25% or 97.25% or 107.25% to 167.25%.
11.No penalty is imposable under section 270A.
12.Substaintive law stated under sections 68 to 69D has not been changed.
13.Scheme of section 115BBE applies to all income covered under sections 68 to 69D, whether in form of cash, bank deposits, jewellery, property, etc.
14.Cash may or may not be in form of demonetized notes.
15.Scheme of section 115BBE also applies to crime monies.
16.Income chargeable under Black Money Act, 2015 cannot be declared.
17.Scheme applies to all categories of assessee be it individual, HUF, BOI, AOP, Trust, Companies, etc.
18.Scheme applies to both resident and non-resident.
19.Scheme applies to assessees covered under Presumptive Taxation Scheme (Sections 44AD, 44ADA, 44AE).
20.Scheme applies to assessment years 2017-18 and onwards.

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