The Vivad Se Vishwas Scheme (VSVS) was first introduced in 2020 by the Government of India to address and resolve pending income tax disputes efficiently. Building upon its success, the government unveiled the Direct Tax Vivad Se Vishwas Scheme, 2024 (VSVS 2024) in the Union Budget of 2024. This comprehensive guide delves into the key aspects of both the 2020 and 2024 schemes, highlighting their objectives, eligibility criteria, compliance processes, and benefits. Additionally, it provides illustrative examples and references to relevant case laws to offer a clearer understanding of the schemes’ applications.
The Vivad Se Vishwas Schemes were conceptualized to mitigate the challenges posed by prolonged income tax litigations, which often result in significant costs and delays for both taxpayers and the government. These schemes aim to provide a streamlined mechanism for the amicable settlement of tax disputes.
• Reduction of Litigation: Minimize the number of pending tax disputes by providing a platform for swift resolution.
• Cost Efficiency: Alleviate the financial burden associated with extended legal proceedings.
• Revenue Generation: Facilitate timely collection of taxes by resolving disputes promptly.
• Taxpayer Relief: Offer concessions such as waivers on penalties and interest to encourage settlements.
• Tax Amnesty Provisions: Taxpayers can settle disputes by paying a specified percentage of the disputed tax, with potential waivers on penalties and interest.
• Simplified Procedures: The schemes outline clear and structured processes for filing declarations and resolving disputes.
• Defined Timelines: Specific deadlines are set for filing declarations and making payments to avail benefits.
• Enactment: The scheme was enacted through the Direct Tax Vivad Se Vishwas Act, 2020, effective from 17th March 2020.
• Rules and Notifications:
o Direct Tax Vivad Se Vishwas Rules, 2020: Introduced via Notification S.O. 1129(E) on 18th March 2020.
o Circulars:
Circular 07/2020 dated 4th March 2020: Provided initial clarifications.
Circular 09/2020 dated 22nd April 2020: Offered further clarifications.
• Enactment: Introduced as part of the Finance (No. 2) Act, 2024, the scheme became effective on 1st October 2024.
• Rules and Forms: Notified via Notification No. 104/2024 dated 20th September 2024, detailing the procedural aspects and required forms.
• Form-1: Taxpayers must electronically submit this form, detailing the pending appeal or dispute, on the Income Tax Portal.
• Form-2: An undertaking to waive rights to pursue further legal remedies related to the dispute must be filed electronically.
• Form-3: Upon reviewing the submitted forms, the designated authority will issue this certificate, specifying the payable amount under the scheme.
• Form-4: Taxpayers are required to pay the specified amount and submit this form as proof of payment and withdrawal of any related appeals.
• Form-5: After verifying Form-4, the designated authority will issue this certificate, confirming the resolution of the dispute.
| Payment Deadline | Dispute Relates to Tax | Dispute Relates to Penalty/Interest/Fees |
|---|---|---|
| On or before 31st March 2020 | 100% of disputed tax (125% for search cases) with waiver of interest & penalty | 25% of the disputed penalty, interest, or fee |
| Extended to 31st December 2020 | 110% of disputed tax (135% for search cases) with waiver of interest & penalty | 30% of the disputed penalty, interest, or fee |
| Payment Deadline | Dispute Relates to Tax | Dispute Relates to Penalty/Interest/Fees |
|---|---|---|
| On or before 31st December 2024 | 100% of disputed tax with waiver of interest & penalty | 25% of the disputed penalty, interest, or fee |
| After 31st December 2024 | 110% of disputed tax with waiver of interest & penalty | 30% of the disputed penalty, interest, or fee |
Additional Relief Measures
• Favorable Decision by Higher Appellate Forum:
o If the taxpayer has already received a favorable ruling from a higher authority, the amount payable is reduced to 50% of the prescribed tax amount.
• Refunds for Excess Payments:
o If the taxpayer has already paid more than the required amount, the excess payment will be refunded, though without interest.
The schemes are applicable to taxpayers with disputes pertaining to:
• Income Tax Assessments: Disputes arising from assessment orders.
• Penalties, Fees, or Interest: Challenges related to penalties, fees, or interest levied.
• Appeals/Writs: Cases where appeals or writs are pending before appellate authorities, including the Income Tax Appellate Tribunal (ITAT), High Courts, or the Supreme Court, as of the specified dates
The Vivad Se Vishwas Schemes provide multiple benefits to taxpayers, ensuring faster dispute resolution and reduced liabilities.
Key Benefits
a. Reduction in Tax Liability:
o Taxpayers are required to pay only the principal disputed tax amount, with waivers on penalties and interest, provided they adhere to the payment deadlines.
• Fast-Track Resolution:
o Avoids prolonged litigation, ensuring dispute resolution within months instead of years.
• Cost Savings:
o Eliminates expenses associated with court proceedings, lawyer fees, and administrative costs.
• Taxpayer-Friendly Approach:
o Provides relief measures that encourage voluntary compliance and ease financial burdens.
• Certainty and Closure:
o Once resolved, the dispute cannot be reopened by the tax department, bringing finality to the case.
To better understand how the schemes work in real-world scenarios, let’s examine a few illustrative case studies.
Case Study 1: Disputed Tax Liability
• Scenario: A taxpayer has an outstanding income tax dispute of ₹5,00,000 (excluding penalties and interest) for Assessment Year 2018-19.
• Without the Scheme: The dispute is pending before the ITAT, and the taxpayer may need to pay additional penalties and interest, increasing the liability to ₹7,50,000.
• Under Vivad Se Vishwas 2024: If the taxpayer applies before 31st December 2024, they pay only ₹5,00,000, with penalties and interest waived.
Case Study 2: Penalty and Interest Waiver
• Scenario: A business received a penalty notice of ₹1,00,000 due to late tax filings in FY 2020-21.
• Without the Scheme: The business contests the penalty, but litigation may take years to conclude.
• Under the Scheme: By applying before 31st December 2024, the business can settle by paying just ₹25,000 (25% of the penalty amount), saving ₹75,000.
The 2024 scheme has some modifications compared to VSVS 2020:
• Broader Scope: Now includes disputes related to tax deducted at source (TDS) and tax collected at source (TCS).
• Flexible Payment Structure: Lower payments required if settled early (by December 2024).
• Simplified Online Process: Filing is now fully digital, reducing paperwork.
The Vivad Se Vishwas Schemes provide a golden opportunity for taxpayers to settle disputes at reduced costs and avoid lengthy litigation. The 2024 scheme further simplifies compliance and offers relief measures that encourage voluntary tax settlement.
By understanding the procedural compliance and eligibility under this scheme, taxpayers can effectively resolve disputes and take advantage of the relief measures offered. For detailed assistance and proper compliance under the Vivad Se Vishwas Scheme, we at ReturnFilings.Com are committed to providing comprehensive support and services. For professional assistance, reach out to us on email: info@returnfilings.com or on whatsapp: https://wa.me/919910123091.
An income tax amnesty scheme is a time-limited program offered by the government to provide relief to taxpayers who have failed to comply with certain income tax regulations. These schemes typically involve waivers or reductions in penalties, interest, or even the principal tax amount owed, subject to certain conditions.
Income tax amnesty schemes are introduced for various reasons, including: Encouraging compliance and increasing tax revenue. Providing relief to taxpayers facing genuine hardships. Reducing litigation and administrative burden on the tax department. Promoting a fresh start for taxpayers.
The specific eligibility criteria vary depending on the particular amnesty scheme. Generally, it benefits taxpayers who have outstanding tax dues, have failed to file returns, or have disclosed incorrect information.
Common features include:
• Waiver or reduction of penalties: Amnesty schemes often waive or reduce penalties for non-compliance.
• Waiver or reduction of interest: Interest on outstanding tax dues may also be waived or reduced.
• Opportunity to disclose undisclosed income: Some schemes provide an opportunity to declare undisclosed income and pay taxes with reduced penalties.
• Immunity from prosecution: Amnesty schemes may offer immunity from prosecution for certain tax offenses.
• Specific time period: Amnesty schemes are typically available for a limited time.
The types of tax dues covered vary by scheme. They may include: Income tax. Wealth tax (if applicable). Other direct taxes.
The specific process is outlined in the details of each scheme announced by the government. Generally, it involves: Determining eligibility based on the scheme’s criteria. Filing a declaration or application in the prescribed format. Paying the required tax and any applicable reduced penalties or interest within the specified timeframe.
Information about current schemes is usually published on the Income Tax Department’s website (www.incometax.gov.in) through notifications, circulars, and press releases.
Each scheme has a specific deadline. It’s crucial to adhere to the deadline to benefit from the amnesty provisions.
Yes, each scheme has specific terms and conditions, including eligibility criteria, the types of tax dues covered, and the extent of waivers or reductions. Some schemes may not cover all types of tax offenses.
If you don’t avail the scheme and continue to be non-compliant, you will be liable for the full amount of taxes, penalties, and interest, and may also face legal action.
Check the specific terms and conditions of the scheme.
The Income Tax Department’s website is the official source.
You may face penalties and legal action.
The rules regarding this will be defined by the specific scheme.
The notification or circular announcing the scheme will provide details on the calculation.
The specific date will be announced in the notification or circular.
Yes, usually there are forms to be filled. Check the scheme details.
A tax consultant can help you understand the scheme’s details and ensure you meet all the requirements, reach out to us on email: info@returnfilings.com or on whatsapp: https://wa.me/919910123091.
Common issues include understanding the eligibility criteria and meeting the deadlines.
