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Clarifications on the Income Declaration Scheme, 2016
July, 15th 2016
                                                                    Circular No. 27 of 2016

                                 Government of India
                                  Ministry of Finance
                                Department of Revenue
                              Central Board of Direct Taxes
                                     (TPL Division)
                                                               Dated 14th day of July, 2016

                 Clarifications on the Income Declaration Scheme, 2016

        The Income Declaration Scheme, 2016 (hereinafter referred to as `the Scheme') came
into effect on 1st June, 2016. To address doubts and concerns raised by the stakeholders,
the Board has issued three sets of FAQs vide Circular Nos. 17, 24 & 25 of 2016. In order to
address further queries received from the public relating to the Scheme, following
clarifications are issued.-

Question No.1:      Can a declaration made under the Scheme be revised before the date
                    of closure of the Scheme i.e. 30.09.2016?

Answer:             It is expected that the declarations made under the Scheme are filed
                    correctly. However, a revised declaration can be filed on or before the
                    date of closure of the Scheme provided the undisclosed income in the
                    revised declaration is not less than the undisclosed income declared
                    in the declaration already filed.

Question No.2:      If an undisclosed income represented in the form of an asset or
                    otherwise pertains to a year falling beyond the time limit allowed
                    under section 149 of the Income-tax Act, 1961 and the said
                    undisclosed income is not declared under the Scheme, then as per the
                    provisions of section 197(c) of the Finance Act, 2016, the said
                    undisclosed income shall be treated as the income of the year in
                    which a notice under section 148 of the Income-tax Act has been
                    issued. The said provision is inconsistent with the existing time lines
                    provided under the Income-tax Act for reopening a case. Please

Answer:             Question No. 4 of Circular No. 24 of 2016 may be referred where the
                    tax treatment of such income has been clarified. Since the Scheme
                    contained in Chapter IX of the Finance Act, 2016 is a later law in time,

                 the provisions of the Scheme shall prevail over the provisions of
                 earlier laws.

Question No.3:   The declaration made in respect of cash, investment etc. under the
                 Scheme would result in increase in capital in the Balance Sheet in
                 extra ordinary manner. Whether such cases of the declarants would
                 be selected for scrutiny under the CASS for this reason?

Answer:          The cases of the declarant shall not be selected for scrutiny under the
                 CASS only on the ground that there is increase in capital in the
                 balance sheet as a result of the declaration made under the Scheme.

Question No.4:   In a case where the declarant gets the benami asset transferred in his
                 name without payment of any monetary consideration to the
                 benamidar, whether capital gains would be chargeable in the hands
                 of benamidar consequent upon such transfer and whether the tax at
                 source @ 1% would be deducted in such case?

Answer:          In this case the consideration for acquisition of benami property has
                 already been paid by the beneficial owner and the fair market value
                 of the property has been declared by the beneficial owner under the
                 Scheme. Since, the transfer of property from benamidar to beneficial
                 owner is only to regularize and there will be no involvement of
                 monetary consideration for transfer of immovable property by the
                 benamidar in the name of the declarant, the question of capital gains
                 in the hands of benamidar and deduction of tax at source thereon
                 shall not arise.

Question No.5:   Under what provision can a declarant be sure that the information
                 contained in a valid declaration shall not be shared with any other
                 law enforcement agency and also shall not be shared within the
                 income-tax department for investigation?

Answer:          Section 195 of the Act provides that provisions of section 138 of the
                 Income-tax Act shall apply in relation to the proceedings under the
                 Scheme. Vide notification S.O. 2322(E) dated 06.07.2016, an order has
                 been passed by the Central Government directing that no public
                 servant shall produce before any person or authority any such
                 document or record or any information or computerized data or part
                 thereof as comes into his possession during the discharge of official
                 duties in respect of a valid declaration made under the Scheme.

Question No.6:   With reference to question No. 5 issued vide Circular No. 25 of 2016,
                 wherein it has been stated that the department will not make any
                 enquiry in respect of sources of income, payment of tax, surcharge and
                 penalty, it may be clarified that whether the payment under the
                 Scheme can be made out of undisclosed income without including the
                 same in the income declared, thereby bringing down the effective rate
                 of tax, surcharge and penalty payable under the Scheme to around 31
                 per cent?

Answer:          It is clarified that the intent of the clarification issued vide question
                 No.5 of Circular No. 25 of 2016 was limited to conduct of enquiry by
                 the Department. It in no way intends to modify or alter the rate of tax,
                 surcharge and penalty payable under the Scheme which have been
                 clearly specified in the Scheme itself. Sections 184 & 185 of the
                 Finance Act, 2016 unambiguously provide for payment of tax,
                 surcharge and penalty at the rate of 45 per cent of undisclosed
                 income. This is illustrated by the following example --

                 In a case a person declares Rs. 100 lakh as undisclosed income, being
                 the fair market value of undisclosed immovable property as on 1 st
                 June, 2016 and pays tax, surcharge and penalty of Rs.45 lakh (30 lakh
                 + 7.5 lakh + 7.5 lakh) on the same out of his other undisclosed income.
                 In this case the declarant will not get any immunity under the Scheme
                 in respect of undisclosed income of 45 lakh utilized for payment of
                 tax, surcharge & penalty but not included in the declaration filed
                 under the Scheme. To get immunity under the Scheme in respect the
                 entire undisclosed income of Rs.145 lakh, the declarant has to declare
                 undisclosed income of Rs.145 lakh (Rs.100 lakh being the undisclosed
                 income represented by immovable property and Rs.45 lakh being the
                 payment made from undisclosed income) and pay tax, surcharge and
                 penalty under the Scheme amounting to Rs.65.25 lakh i.e., 45 per cent
                 of Rs.145 lakh.

Question No.7:   Whether there is any time limit for the declarant under the Scheme to
                 file Form-3?

Answer:          As per section 187(2) of the Finance Act, 2016, the time limit for filing
                 Form-3 is same as the time limit notified for payment of tax,
                 surcharge and penalty under the Scheme.

Question No.8:     Whether immunity from initiation of prosecution would be available
                   to the Directors of the company or the partners of the firm in respect
                   of the undisclosed income declared under the Scheme by the company
                   or partnership firm, as the case may be?

Answer:            Yes, immunity to the directors or the partners, as the case may be,
                   shall be available in respect of the undisclosed income declared under
                   the Scheme by the company or partnership firm.

Question No.9:     Whether a person having undisclosed income in the form of an
                   investment in immovable property in the name of his spouse can
                   declare the fair market value of the property in his own name if the
                   funds for acquisition of the said property were provided by such

Answer:            Yes.

Question No.10:    Rule 3(1)(c)(I) of the Income Declaration Scheme Rules, 2016 provides
                   for manner of determination of fair market value of quoted shares
                   and securities. In this context, it may be clarified that if a share is
                   listed on more than one recognised stock exchange and the quoted
                   price of the share as on 01.06.2016 on the recognised stock exchanges
                   is different, then what shall be the quoted share price for determining
                   the fair market value of such share under the Scheme?

Answer:            In such a case the quoted price of the share shall be computed with
                   reference to the recognised stock exchange which records the highest
                   volume of trading in the share as on 01.06.2016.

                                                                        (Dr. T.S. Mapwal)
                                               Under Secretary to the Government of India
Copy to:-

1.   PS to FM/ OSD to FM/ OSD to MoS(R).
2.   PS to Secretary (Revenue).
3.   The Chairperson, Members and all other officers in CBDT of the rank of Under
     Secretary and above.
4.   All Pr. Chief Commissioners/ Pr. Director General of Income-tax ­ with a request to
     circulate amongst all officers in their regions/ charges.
5.   Pr. DGIT (Systems)/ Pr. DGIT (Vigilance)/ Pr. DGIT (Admn.)/ Pr. DG (NADT)/ Pr.
     DGIT (L&R).
6.   CIT (M&TP), CBDT.
7.   Web manager for posting on the departmental website.

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