Tax Amnesty Schemes

Tax Amnesty Schemes are various resolution schemes to settle tax disputes or to settle tax litigation. Tax Amnesty schemes provided by Government under various names such as Vivad se Vishwas Scheme 2020

Start With Confidence
CA/CS Assisted | 4.8/5 Rating

Comprehensive Guide to Income Tax Amnesty Schemes in India: Vivad Se Vishwas Scheme 2020

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.

1. Introduction to Vivad Se Vishwas Schemes

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.

1.1. Objectives of the Schemes

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.

1.2. Key Features of the Schemes

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.

2. Legal Framework

2.1. Vivad Se Vishwas Scheme 2020

Enactment: The scheme was enacted through the Direct Tax Vivad Se Vishwas Act, 2020, effective from 17th March 2020.
Rules and Notifications:
- Direct Tax Vivad Se Vishwas Rules, 2020: Introduced via Notification S.O. 1129(E) on 18th March 2020.
- Circulars:
  - Circular 07/2020 dated 4th March 2020: Provided initial clarifications.
  - Circular 09/2020 dated 22nd April 2020: Offered further clarifications.

2.2. Vivad Se Vishwas Scheme 2024

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.

3. Compliance Process

3.1. Filing of Declaration

Form-1: Taxpayers must electronically submit this form, detailing the pending appeal or dispute, on the Income Tax Portal.

3.2. Undertaking

Form-2: An undertaking to waive rights to pursue further legal remedies related to the dispute must be filed electronically.

3.3. Issuance of Certificate

Form-3: Upon reviewing the submitted forms, the designated authority will issue this certificate, specifying the payable amount under the scheme.

3.4. Payment and Intimation

Form-4: Taxpayers are required to pay the specified amount and submit this form as proof of payment and withdrawal of any related appeals.

3.5. Discharge Certificate

Form-5: After verifying Form-4, the designated authority will issue this certificate, confirming the resolution of the dispute.

4. Relief Measures and Payment Timelines

4.1. Vivad Se Vishwas Scheme 2020

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

4.2. Vivad Se Vishwas Scheme 2024

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:
- 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:
- If the taxpayer has already paid more than the required amount, the excess payment will be refunded, though without interest.

5. Eligibility Criteria

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

6. Benefits of Vivad Se Vishwas Schemes

The Vivad Se Vishwas Schemes provide multiple benefits to taxpayers, ensuring faster dispute resolution and reduced liabilities.

6.1. Key Benefits

Reduction in Tax Liability:

- 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:
- Avoids prolonged litigation, ensuring dispute resolution within months instead of years.
Cost Savings:
- Eliminates expenses associated with court proceedings, lawyer fees, and administrative costs.
Taxpayer-Friendly Approach:
- Provides relief measures that encourage voluntary compliance and ease financial burdens.
Certainty and Closure:
- Once resolved, the dispute cannot be reopened by the tax department, bringing finality to the case.

7. Case Studies and Examples

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.

8. Latest Amendments & Vivad Se Vishwas Scheme 2024

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.

9. Conclusion

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.

10. Additional Resources

For further reading, explore the following topics:

· Corporate Tax Advisory – Expert Insights on Planning, Compliance, and Optimization.

· International Tax Advisory – Strategies for Cross-Border Taxation and Compliance.

· Complete guide on Tax deduction, Tax Exemption and Rax Relief.

· Tax Notices and Replies – Understanding Types, Responses, and Legal Implications.

Frequently Asked Questions (FAQs) on Income Tax Amnesty Scheme

General Information about Income Tax Amnesty Schemes

1. What is an income tax amnesty scheme?

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.

2. Why are income tax amnesty schemes introduced?

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.

3. Who can benefit from an income tax amnesty scheme?

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.

Key Features of Income Tax Amnesty Schemes

4. What are the common features of income tax amnesty schemes?

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.

5. What types of tax dues are covered under amnesty schemes?

The types of tax dues covered vary by scheme. They may include: Income tax. Wealth tax (if applicable). Other direct taxes.

Availing an Income Tax Amnesty Scheme

6. How do I avail an income tax amnesty scheme?

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.

7. Where can I find information about current income tax amnesty schemes?

Information about current schemes is usually published on the Income Tax Department’s website (www.incometax.gov.in) through notifications, circulars, and press releases.

8. What is the time limit for availing an income tax amnesty scheme?

Each scheme has a specific deadline. It’s crucial to adhere to the deadline to benefit from the amnesty provisions.

Other Considerations

9. Are there any limitations to income tax amnesty schemes?

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.

10. What happens if I don’t avail the income tax amnesty scheme?

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.

Indian Owner

Foreign Owner

Special Entities

Government Registrations

Return & Compliances

Conversion of Entities

Change Services

Closure of Entities