Direct tax dispute settlement scheme 2020
Authored by Harsh Raj
Keywords: Tax, Dispute, Settlement, Tax Lax.
The government has put forward a bill in the Parliament regarding the direct tax dispute settlement scheme. The scheme is termed as "vivad se viswas scheme 2020" by the Parliament. This scheme talks about the resolution of dispute relating to direct taxes. It proposes discounted payment or waiver of interest on tax defaults. The scheme can only be availed until 31st March 2020 but recent update shows that the government has shifted its timeline to 31st December 2020 due to lock down and pandemic.
Objective of the scheme
The main objective of this scheme is to resolve the number of suits pending in the courts and tribunals for a very long time and to save the time of judiciary and the citizens. The scheme enables the income tax department to collect timely revenue for the government. It also helps taxpayers to clear their tax arrears by getting waiver of payment of interest and penalty.
Who is eligible for this scheme?
The scheme will be available for those people who have filed suits or appeals for tax disputes in CIT, Income Tax Appellate Tribunal (ITAT), High Courts or the Supreme Court as on 31st January 2020. It doesn't matter whether the tax is pending or already been paid even though if the person already paid the tax he will be entitled for this scheme and he will get the extra money paid before filing declaration and refund without any interest. Disputed tax can also include the tax deducted at source(TDS) or tax collected at source (TCS) and hence they can also take advantage of this scheme.
As per the scheme the concerned authority will declare the amount payable by the taxpayer within 15 days of date of declaration by the taxpayer. The amount will be declared as per the provisions of the scheme and hence a certificate will be provided which consists of tax amount which needs to be paid by the taxpayer within 15 days of the receiving of the certificate.
How tax arrears will be calculated according to this scheme?
If the taxpayer settles the tax dispute before 31st march 2020 under this scheme he will get the waiver from payment of interest and penalty. After 31st march an additional penalty of 10% of disputed tax had to be paid although, if additional penalty of 10% is higher than the penalty imposed then in this condition, whichever is less can be paid by the taxpayer.
In case, Dispute is Related to Interest or Penalty amount taxpayer is required to pay 25% of the disputed interest or disputed penalty or disputed fee before 31st march 2020.
The taxpayer who wants to avail the benefit of this scheme on or after 1st April 2020 would be required to pay 30% of the disputed penalty or disputed fee or disputed interest to the concerned authority and in case of disputed tax they need to pay 125% of the disputed tax and after 31st march 2020, it needed to be paid 135% of disputed tax.
In case of appeals/writs/SLP filed by department 50% of disputed tax and 62.5% in search cases needs to be filed as on 31st march 2020 and after it needs to be paid 55% of disputed tax and 67% in search cases.In case of tax arrears related to disputed interest or disputed penalty or disputed fees the taxpayer needs to pay 12.5% of disputed interest, penalty of fees as on 31st march 2020 and after that period he need to pay 15% of disputed interest, penalty of taxes.
Who cannot be eligible for the scheme?
Vivad se viswas scheme will not be availed in following cases:-
●The scheme will not be applicable for an assessment year where the section 153A or section 153C of the IT Act is related to any tax arrears.
● For an assessment year where the prosecution has been instituted under IPC or Income tax Act on or before the date of filing of declaration.
● In case of any undisclosed income from outside India or any undisclosed assets outside India.
● For any assessment that has been made according to information received from outside the jurisdiction of India under section 90 or section 90 A of the Income-tax Act.
● The scheme will not be applicable in cases where the appeal before the Commissioner in regard to the notice of enhancement has been made under section 251 of the Income Tax Act.
● The scheme will also not be applicable to any individual against whom an order of detention has been passed under the provisions of Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974.
● In Search cases if disputed tax in a year is more than Rs.5 crore.
Effect of the scheme
After filing for this scheme all the cases, writs, appeals, SLPs and arbitration should be withdrawn by both taxpayer and the department concerned. Under this scheme immunity will be granted to the taxpayer and he will not be prosecuted according to the provision of Income tax Act in respect to all the matters covered in the declaration. In case of excess payment made, before filing the declaration he shall be entitled to refund without any interest.
The scheme is largely beneficial for the common people whose tax arrior are not in big numbers. This is basically a choice based scheme and people have to decide whether they are benefiting or not according to their cost analysis. This scheme is beneficial for both government and citizens as it saves the time of the general public to involve in the cases and government is also benefiting as it helps in timely generating the revenue for the government expenses.