Income Declaration Scheme- Overview, Details & Benefits

Income Declaration Scheme

The government launched Income Declaration Scheme in the year 2016 and offered a “last window” to people with unaccounted wealth to come clean or face stringent penalties while inviting others to blow the whistle on those suspected to be holding black money as it launched the scheme that had been announced earlier.

Income declaration scheme, 2016 was a scheme introduced by the Prime Minister of India, Narendra Modi led Government of India as a part of the 2016 Union budget to unearth black money and bring it back into the system. Starting from 1 June and ending to 30 September, the scheme provided an opportunity to income tax and wealth tax defaulters to avoid litigation and become compliant by declaring their assets, paying the tax on them and a penalty of 45% thereafter.

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Income Declaration Scheme, 2016

Those who declare cash deposits under this period of the scheme activatio will be levied a charge of 50%, which breaks down into 30% tax, 33% surcharge and 10% penalty. In addition to this, 25% of the amount declared or deposited will go into the non interest-bearing Pradhan Mantri Garib Kalyan Deposit Scheme, 2016, for four years.
The scheme guaranteed immunity from prosecution under the Income Tax Act, Wealth Tax Act, 1957, and the Benami Transactions (Prohibition) Act, 1988 and also ensured that declarations under it would not be subjected to any scrutinizes or inquiries.

Notable declarations

Among the total declarations made under the Income declaration scheme, 2016, a total of ₹138.6 billion (US$2.2 billion) amount was declared by a single individual Mahesh Shah of Ahmedabad, Gujarat.

Who Can Make a Declaration

Any person can make declaration under the Income Declaration Scheme, 2016, such as:

  • Individuals,
  • HUFs,
  • Companies,
  • Firms,
  • Association of persons (AOP) etc.,

are eligible to make declaration under the Scheme.

Scheme does not apply if :–

The scheme will not be applicable if any of the following condition occurs:

  • Notice has been issued under section 142(1)/143(2)/148/153A/153C of I-T Act (debarred only for AY for which notice is issued).
  • Search/Survey have been conducted (debarred for affected years only).
  • Income sought to be declared is chargeable under the Black Money Act, 2015.
  • COFEPOSA detainees, persons notified under Special Courts Act (1992), cases of prosecution under NDPS Act, Prevention of Corruption Act, and certain offences under Indian Penal Code.

Amounts Payable by Declarant

The amount to be payed by the declarant under the scheme of Income Declaration is as follows:

1. Tax @ 30% of undisclosed income.

2. Surcharge @ 7.5% of undisclosed income.

3. Penalty @ 7.5% of undisclosed income.


Benefits of Declaration

The Income Declaration Scheme possesses the following benefits:

1. No Wealth Tax on assets declared.

2. No scrutiny or inquiry under Income-tax Act and Wealth Tax Act in respect of declaration.

3. Immunity from prosecution under Income Tax Act and Wealth Tax Act in respect of declaration.

4. Immunity from Benami Transactions (Prohibition) Act, subject to transfer of assets by the benamidar to the real owner before 30.09.2017.

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