Assessment of Undisclosed Income in Income Tax Act u/s 133A

This arrangement is similar to VDS (Voluntary Disclosure Scheme). This scheme is effective from 1st June 2016. Declaration of undisclosed income or assets could be made in Form Number.1 in a period of four months (before Sep 30, 2016). The assessee is required to pay tax at the rate of 30 percent with surcharge at 7.5 percent along with a penalty of 7.5 percent. The total tax payable would be 45 percent of the total undisclosed income of the assessee.

Who can declare undisclosed income under the scheme

Any Individual, AOP, HUF, BOI, LLP, Firm or a company could make a declaration of their concealed income.

As per Section 193 of the Finance Act, following persons are not eligible to declare their undisclosed income under this scheme:

(i) Any individual against whom an order of detention has been passed under the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974.

(ii) Any individual against whom an order of prosecution has been passed for a wrong doing which is punishable under the Narcotic Drugs and Psychotropic Substances Act, 1985, Chapter IX or Chapter XVII of the Indian Penal Code, the Prevention of Corruption Act, 1988 and the Unlawful Activities (Prevention) Act 1967.

(iii) Any individual who is notified u/s 3 of the Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992

(iv)This scheme does not apply to any concealed foreign income and asset that is chargeable to tax under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015.

Incomes or Assets that can be disclosed

As per Section 180 of the Finance Act, every eligible person could declare their undisclosed income or assets under this which is earned prior to 1.4.2016. Incomes that could be disclosed under this scheme include:

(i) Income pertaining to which the assessee has not furnished the return of income u/s 139 of the Income-tax Act.

(ii) Income that the assessee failed to disclose in all his returns which were filed before 1.6.2016.

(iii) Income that has escaped which got away from an assessment of the failure of the assessee for disclosing the same.

(iv)Where the concealed income is kept as an investment in any asset, the fair market value as on 1.6.2016 would be deemed as the concealed income. The Income Declaration Scheme Rules, 2016 Rule 3 issued by the Central Board of Direct Taxes provides the mechanism for determining such Fair Market value of the assets.

(v) Furthermore, no deduction with respect to any expenditure is allowed in connection with the concealed income under this scheme.