The Central Board of Direct Taxes (CBDT), Ministry of Finance, Department of Revenue, Government of India on 18th August, 2016 issues Clarifications relating to the Income Declaration Scheme, 2016.
Object of clarifications:
The Income Declaration Scheme came into effect on 1.6.2016. To address doubts of the common stakeholders, the Board has issued some frequently asked questions through Circular Nos. 17, 24, 25 and 27of 2016.
To address further issues of the public relating to the Income Declaration Scheme Scheme, the clarifications have been issued by the CBDT.
Answers to the frequently asked questions:
- In some cases, the undisclosed income is reflected in fictitious creditors. Whether the assessee can declare only such fictitious liability as it may not be connected with any specific investment?
The answer is in cases where loans or advances received, share capital, etc. are declared in the audited balance sheet but they are fictitious and cannot be directly connected with acquisition of an asset in the balance sheet, then such liabilities can be declared under the Scheme without linking them with the investment in any particular asset.
However, where there is a direct connection between the fictitious liability and the asset, the amount to be declared shall be actually the fair market value of the said asset as on 1st June, 2016.
- Whether the amount declared in an earlier assessment year can be considered for the purpose of explaining the transaction(s) in the assessment proceedings for following years?
The answer is according to section 189 of the Finance Act, 2016, any declaration made under the Scheme shall not be related to assessments which are already completed.
However, in an assessment proceeding for an assessment year after the year for which the income is declared, the income declared for an earlier assessment year can be considered for the purpose of explaining the transactions if there is any connection between the income declared and the transactions of the following assessment year.
- Whether the valuation report of assets declared shall be asked for by the department for inquiry at any point of time?
The answer is the valuation report from a registered valuer shall not be challenged by the department on any ground. However, the valuer should furnish a correct report in accordance with the settled principles of valuation.
If there is any misrepresentation, appropriate action according to law shall be taken against the said valuer.
- Though the fair market value is taxed under IDS and it will be treated as cost of acquisition at the time of future sale of such asset, whether it would treat the asset as long term or short term?
The issue was earlier clarified through Circular No.17 dated 20.05.2016 stating that in such cases period of holding shall be considered to start from 1.6.2016 as the asset has been re-valued on such date.
However, considering the representation from many stakeholders and considering that it may lead to complications in calculation of capital gain at the time of sale of asset, the issue has been reconsidered.
Accordingly, it has been clarified that the period of holding of asset under the Income Declaration Scheme shall be calculated on the basis of the actual date of acquisition of the said asset.
Further it should be noted that the indexation benefit in connection with such amount declared shall be available from 1.6.2016 only.
- What will be the value of immovable property if its cost is only partly evidenced by a registered deed and partly by some other means?
The answer is in such a case, the choice of calculating the fair market value of the immovable property by applying the stamp duty value shall be available only for that part of the property the cost of which can be proved by a registered deed. Regarding the rest part, the fair market value of the property shall be determined on the basis of the provisions of rule 3(1)(d) of the Rules without considering the proviso.
- A person has already filed a declaration under the Scheme fixing the value of immovable property as per the Income Declaration Scheme Rules, 2016 before the amendment Rule notified by CBDT dated 17.8.2016. In such a case whether he can revise the declaration as per amended rules?
Whether the payment of amount payable under the Scheme can be made in cash to the Banks? Further, whether the amount disclosed under the Scheme can be deposited in the bank account in cash?
The answer is the person can revise the fair market value of immovable property if that is record due to the amended provisions of the Income Declaration Scheme Rules, 2016 even if such revision may result in decrease in the declared amount of the immovable property.
- Whether the payment of any amount under the Scheme can be made in cash to the Banks or the same can be deposited in the bank account in cash?
The answer is the Reserve Bank of India has been requested to issue instructions to banks to accept such payment of tax in cash. Further request has been made to instruct the banks to allow deposit of cash in their counters as per existing circular dated 01.07.2014.
- Whether the information of cash deposits made in bank against a declaration made under the Scheme shall be reported to the department?
The answer is that no adverse action shall be taken against the person by the department based on the information regarding cash deposit made after the declaration under the Scheme.
- If a trust or institution registered under section 12A of the Act files declaration under the Scheme, whether its registration shall be cancelled based on such declaration?
The answer is that the registration under section 12A of the Act shall not be cancelled merely based on the information filed in the declaration under the Scheme.
- Where a person has claimed deduction for making bogus donation, what should be the amount of declaration under the Scheme?
The answer is that the person has to declare the amount of deduction claimed for bogus donation.