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Clarifications on the Income Declaration Scheme, 2016
August, 19th 2016
                                                                     Circular No.29 of 2016

                                 Government of India
                                  Ministry of Finance
                                Department of Revenue
                              Central Board of Direct Taxes
                                     (TPL Division)
                                                          Dated 18th day of August, 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 & 27 of 2016. In order
to address further queries received from the public relating to the Scheme, following
clarifications are issued.-

Question No.1:      In certain cases, the undisclosed income might be reflected in
                    creditors or other liability which may be fictitious. Whether in such
                    cases, the assessee can disclose only such fictitious liability as it may
                    not be possible to link it to any specific asset or investment?

Answer:             In a situation where loans, creditors, advances received, share capital,
                    payables etc. are disclosed in the audited balance sheet but are
                    fictitious in nature, and such liabilities cannot be directly linked to
                    acquisition of a particular asset in the balance sheet, then such
                    fictitious liabilities can be disclosed under the Scheme as such without
                    linking the same with the investment in any specific asset. However,
                    in cases where there is a direct link between the fictitious liability and
                    the asset acquired then the amount to be declared shall be the fair
                    market value of the acquired asset as on 01.06.2016.

Question No.2:      Whether the amount declared under the Scheme for an earlier
                    assessment year can be taken into account to explain the
                    transaction(s) in the assessment proceedings for subsequent
                    assessment year(s)?

Answer:             As per section 189 of the Finance Act, 2016, any declaration made
                    under the Scheme shall not affect finality of completed assessments.
                    However, in an assessment proceeding before the Assessing Officer
                    for an assessment year subsequent to the year for which the income is
                    declared under the Scheme, the income declared for an earlier

                 assessment year can be taken into account to explain the transactions
                 provided there is a nexus between the income declared and the
                 transactions of the subsequent assessment year.

Question No.3:   Whether the valuation report of assets declared under the Scheme
                 shall be called for by the department for any enquiry at any time?

Answer:          The valuation report from a registered valuer shall not be questioned
                 by the department. However, the valuer is expected to furnish a true
                 and correct valuation report in accordance with the accepted
                 principles of valuation. In case of any misrepresentation, appropriate
                 action as per law shall be taken against the registered valuer.

Question No.4:   Though the fair market value as on 1st June, 2016 is taxed under IDS,
                 and such amount will be treated as cost of acquisition at the time of
                 future sale of concerned asset, whether such treatment shall affect the
                 character of the asset as long term or short term?

Answer:          The issue was earlier considered and it was clarified vide Circular
                 No.17 dated 20.05.2016 that in such cases period of holding shall be
                 deemed to begin from 01.06.2016 as the asset has been revalued on
                 such date. However, considering the representation received from
                 various stakeholders and the fact that this may lead to complications
                 in calculation of capital gain at the time of sale of asset which was
                 partly funded from undisclosed income now declared under the
                 Scheme, the matter has been reconsidered. Accordingly, in
                 supersession to the earlier clarification as referred above, it is clarified
                 that the period of holding of asset declared under the Scheme shall be
                 based on the actual date of acquisition of such asset. However, the
                 indexation benefit in respect of the amount declared under the
                 Scheme shall be available from 01.06.2016 only. The said situation is
                 illustrated as below:-
                 Suppose Mr. `A\' purchased a house on 01.10.2011 for Rs.10 lakh and
                 declares fair market value of the same as on 01.06.2016 under the
                 Scheme at Rs.20 lakh. If the said house is sold on 01.10.2017 for Rs.30
                 lakh, the holding period for the house for purposes of computation of
                 capital gain shall be six years i.e. from 01.10.2011 to 01.10.2017. As the
                 holding period exceeds three years, the gains arising from such
                 transfer shall be treated as long term capital gain. Further, the
                 indexation benefit in this case shall be available on Rs.20 lakh from
                 01.06.2016 to 01.10.2017.

Question No.5:   What will be the value of immovable property to be declared under
                 the Scheme in a case where the cost of immovable property is only
                 partly evidenced by a registered deed and partly otherwise?

Answer:          In such a case, the option of calculating the fair market value of the
                 immovable property based on applying the cost inflation index to
                 stamp duty value shall be available only in respect of that part of the
                 property the cost of which is evidenced by a registered deed. With
                 regard to the remaining part the fair market value of the property
                 shall be determined based on the provisions of rule 3(1)(d) of the
                 Rules without taking into effect the proviso to the said rule. The said
                 situation is illustrated as below:-
                 Suppose, Mr. `X\' purchased a piece of land in year 2004-05 for Rs.10
                 lakh, however the stamp duty value was Rs.15 lakh. Thereafter, in the
                 period 2005-06 to 2007-08, Mr. `X\' constructed a two storeyed house
                 on the said land. The amount to be declared in respect of the said
                 property shall be (A + B) where
                 A= Value of land (if the assessee opts for valuation on the basis of
                     indexation) shall be
                     Rs.15 lakh x cost inflation index of 2016-17
                                   cost inflation index of 2004-05
                 B= Fair market value of the house (excluding value of the land) as on
                 01.06.2016 as determined by the registered valuer or the cost of
                 construction whichever is higher.

Question No.6:   A declarant has already filed a declaration under the Scheme
                 determining the value of immovable property on the basis of Income
                 Declaration Scheme Rules, 2016 prior to their amendment vide the
                 Income Declaration Scheme (Third Amendment) Rule notified vide
                 CBDT Notification No. 74 dated 17.8.2016. In such a case whether the
                 declarant can revise the declaration based on such amended rules?

Answer:          Yes, the declarant can revise the fair market value of immovable
                 property declared in the declaration already filed on account of the
                 amended provisions of the Income Declaration Scheme Rules, 2016
                 even in a case where such revision may result in downward revision
                 of the declared amount in respect of the immovable property.

Question No.7:   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?

Answer:           Reserve Bank of India (RBI) has been requested to issue instructions
                  to banks to allow payment of tax under the Scheme in cash. RBI has
                  also been requested to instruct the banks to allow deposit of cash over
                  the counter in accordance with its existing master circular No. DBOD
                  No.Leg.BC.21/09.07.006/2014-15 dated 01.07.2014.

Question No.8:    Whether the information of cash deposits made in bank as a
                  consequent to declaration made under the Scheme shall be picked up
                  by FIU or reported to the income-tax department?

Answer:           It is clarified that no adverse action shall be taken against the
                  declarant by FIU or the income-tax department solely on the basis of
                  the information regarding cash deposit made consequent to the
                  declaration under the Scheme.

Question No.9:    In case a trust or institution registered under section 12A of the
                  Income-tax Act files declaration under the Scheme, whether the
                  registration under section 12A shall be cancelled on the basis of such

Answer:           No, the registration under section 12A of the Income-tax Act shall not
                  be cancelled solely on the basis of the information furnished in the
                  declaration filed under the Scheme.

Question No.10:   Where a person has claimed weighted deduction, say 175%, on
                  account of making bogus donation then what should be the amount
                  of declaration under the Scheme?

Answer:           The declarant has to declare the amount of weighted deduction
                  claimed in respect of bogus donation i.e. 175% of the bogus donation
                  in this case.

Question No.11:   In a case where the return of income has not been filed for an
                  assessment year but the time limit for filing the same has not expired
                  under section 139 of the Income-tax Act, whether the declaration
                  under the Scheme can be filed for such assessment year?

Answer:           The declaration for the assessment year for which the return of
                  income has not been filed can be made under the Scheme even
                  though the time limit for filing the return under section 139 of the
                  Income-tax Act has not expired.

Question No.12:    In answer (b) to question No.6 of Circular No.17 of 2016 dated
                   20.05.2016, it has been stated that \"person is barred from making a
                   declaration under the Scheme in respect of an undisclosed income in
                   which the survey was conducted\". Please clarify?

Answer:            The clause (b) of answer 6 may be read as \"In case of survey
                   operation, the person is barred for making a declaration under the
                   Scheme in respect of the previous year in which the survey was
                   conducted. The person is, however, eligible to make declaration in
                   respect of an undisclosed income of any other previous year\".

                                                                       (Abhishek Gautam)
                                               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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