Filed your Income Tax return already? Have you disclosed all your income or did you miss a thing or two? Whether intentional or by mistake, you can now make full use of this scheme, introduced by the government, called the Income Declaration Scheme (IDS).
Remember those SMS alerts from the government about a certain IDS something that you either marked as ‘read’ or deleted from your phone? That was actually your second chance to declare undisclosed income legally. The IDS is not just for people who have black money to hide but also for those who didn’t know they would have to pay tax on assets or income they received in the past.
This scheme allows a person to disclose any amount of unaccounted assets or income by paying up the applicable taxes (30%), surcharge (7.5 %) and penalty (7.5 %) that would round up to 45 % of the undisclosed income.
Note: The last date to declare undisclosed income is 30th September, 2016.
Why Should I Pay Taxes on Undisclosed Income?
To start with, it is illegal to not declare assets. Any income that you hide from the government is treated as black money.
The Income Declaration Scheme is a great effort by the government to reduce the amount of black money in the marketplace. There is a lot of money stashed in black and that is an indirect hindrance to business. The main aim of this scheme is to help businesses clean up their balance sheets and turn that black money into white so they can reinvest it into their business. Also, having clean records can amp foreign trade.
While 45% is a pretty high percentage, paying up might be a better option than ending up in prison. Yes, if you don’t pay your taxes, there is a chance of you going to prison. According to the Central Board of Direct Taxes (CBDT), stringent action will be taken against anybody who doesn’t pay taxes on undisclosed income. Your home or office could be raided by the IT department and all the hidden money could be seized.
Losing all that money or just paying 45% of your undisclosed income? What would you choose?
Benefits of Declaring Undisclosed Income under IDS
If you declare your undisclosed income under the IDS you get immunity from prosecution or penalty that comes under the Wealth Tax Act of 1957 and the Income Tax Act of 1961. Also, the government has promised confidentiality of information on all undisclosed income.
No criminal charges and promised secrecy! Reason enough to pay up under IDS?
Okay, How Do I Go About Doing This?
Firstly, you need to declare your undisclosed income on a form issued by the government – Form 1 under Section 183 of the Finance Act of 2016.
Identify and list down the assets you haven’t disclosed earlier. Make sure to mention if any of these assets were acquired using undisclosed income. In that case, you will have to disclose the asset’s Fair Market Value (FMV) as of June 2016. In the case of assets like jewellery and immovable property, you will have to compare the buying price and selling price (as of July 2016) and declare the one that’s higher.
In the case of financial assets like shares and securities, the FMV is to be ascertained by comparing the higher of the two – cost of acquisition and the average of the highest and lowest quote on the valuation date. You should then get a certified copy from a registered valuer and attach it with the declaration form.
Declaration can be done both online and offline.
For online filing, follow these steps:
- Head over to https://incometaxindiaefiling.gov.in
- Find the e-file tab and click on “Upload Form 1 (Income Declaration Scheme, 2016)”
- The link will redirect you to a tab where you can upload the form.
However, the e-filing option is only available to those who have a digital signature. The rest have to do it offline. Head over to your nearest Income Tax office and hand over your form. If your declaration is accepted, you will receive an acknowledgement from the IT department after which you will have to pay the taxes on the amount you declared.
Income Tax declarations are accepted only if you have a PAN number. The government has made a provision to accept your declaration even if you don’t have a PAN card. However, you will get an acknowledgement receipt only after you get a valid PAN number.
You can apply for a PAN card online.
Additional Reading: File ITR And Submit ITR-V Online Through Your Bank Account
Exceptions to the Rule
Not everybody can take advantage of the Income Declaration Scheme. There are some exceptions to the rule.
- If you have already declared your undisclosed income and it is pending in appeal, you will not be able to claim the benefits of the IDS.
- If you’ve disclosed income under IDS but the declaration does not meet the scheme’s policies, it will be assessed under the normal IT Act.
- If the information provided by you is found wrong, misrepresented or faulty – your application will not be accepted.
Earlier, the last date to pay off (not declare) the entire amount was 30th November, 2016 but considering there could be huge amounts involved, the government has made a provision for paying the amount in three instalments by 30th September, 2017.
In an official announcement, the government said:
“During the course of meetings and seminars held in different parts of the country, various stakeholders have expressed concern that the time period available under the Scheme up to 30th November, 2016 for making payment of tax, surcharge, and penalty is very short, especially where funds in liquid form are not readily available with the declarants. It has also been mentioned that for making payment by 30.11.2016, the declarants may have to opt for distress sale of the assets.
Taking into consideration the practical difficulties of the stakeholders, the Government has decided to revise the time schedule for making payments under the Scheme…”
You will have to pay “a minimum amount of 25% of the tax, surcharge and penalty” by 30th November, 2016. You can pay up the other 25 % by 30th March, 2017 and the balance amount on or before 30th September, 2017.
The last date to declare undisclosed income is 30th September, 2016. HURRY!
Up until now, the IT Department has received crores of Undisclosed Income as of the first week of September. A number of raids and seizures have been conducted since July 2016 and the IDS seems to be a success.
If you don’t want your house to be raided, declare your undisclosed income today.
Want to save on taxes? Getting a Home Loan is a great way to avail of legal tax benefits. While there are other reasons that should urge you to get a Home Loan, the tax aspect of it is pretty appealing.
Home Loans offer several tax benefits under different sections of the Income Tax Act 1961.
Under Section 24
- You can claim up to Rs. 2,00,000 in taxes on interest paid on a Home Loan, annually.
- If the house is being let out on rent, the complete interest amount is exempt.
- If the loan has been taken for repair or reconstruction, you can claim a benefit up to Rs. 30,000 annually.
Under Section 80C
- You can get a tax benefit of Rs. 1, 50,000 on repayment of the principal, annually.
If you hold the loan with a partner, you can each claim tax benefits on the loan separately!
Additional Reading: Did You Know About These Tax Benefits on Home Loans?
Convinced yet that applying for a Home Loan is the way to go?