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February 3, 2021

Rs 95,000 crore sum settled under ‘Vivad se Vishwas’

by CA Shivam Jaiswal in Budget, Income Tax

Rs 95,000 crore sum settled under ‘Vivad se Vishwas’

Vivad se Vishwas schemeis a direct tax scheme announced in Budget 2020, for settling tax disputes between individuals and the income tax department. The scheme aims to end litigation and legacy disputes under the direct taxes’ category as Rs 9.32 lakh crore worth of revenue is blocked in approximately 4.8 lakh appeals pending at various income tax appellate forums.

The entities who opt for the scheme have to pay a requisite tax following which all litigation against them is closed by the tax department and penal proceedings dropped. A disputed amount of Rs 95,000 crore has been settled by about 1.20 lakh entities who opted for the ‘Vivad se Vishwas’ scheme to resolve long pending litigation issues with the Income Tax Department.

Success of the Scheme

  • The Vivad se Vishwas (VsV) scheme, which was announced by the finance minister in her Budget speech last year, has brought on the settlement table various category of taxpayers like corporates, non-corporates, state governments and public sector undertakings (PSUs).
  • So far, the scheme has had a stupendous success, and till January 31 about 1.20 lakh forms have been filed which means about 22-23% of tax disputes got settled under this scheme and the amount involved is Rs 95,000 crore.
  • Right now, CBDT almost collected Rs 6.80 lakh crore. This is the net collection which is a very good figure given the fact that CBDT had given 7% more refunds this time than the last year.
  • Despite the refunds, they reached these figures and there are still two months remaining in this financial year and typically and historically the good part of the collections comes in the fourth quarter.

Extension of Date

  • Earlier, the scheme offered complete waiver on interest and penalty to the taxpayers with a full and final settlement of the dispute if the scheme was availed by 31st December, 2020.
  • In October 2020, the government had extended for the third time the deadline for making payment under the Vivad Se Vishwas scheme by three months to March 31, 2021 in wake of the Covid-19 pandemic.
  • However, declarations had to be filed by December 31, 2020. But, considering the surge in Vivad se Vishwas scheme applications that got filed in December 2020 and demands of taxpayers, the government had extended the scheme by a month till 31st January, 2020.
  • The last date for filing declarations under this scheme has again been extended by a month, from January 31 to February 28 after the government got requests from various entities to extend the deadline.

What shall be the amount payable by the declarant under this scheme?

Nature of tax arrearAmount payable under this Act on or before 31.03.2021Amount payable under this Act on or after 01.04.2021
where the tax arrears are the aggregate amount of disputed tax, interest chargeable or charged on such disputed tax and penalty leviable or levied on such disputed taxamount of the disputed taxthe aggregate of the amount of disputed tax and 10% of disputed tax
where the tax arrears include the tax, interest or penalty determined in any assessment on the basis of search under section 132 or section 132A of the Income-tax Act.the aggregate of the amount of disputed tax and 25% of the disputed taxthe aggregate of the amount of disputed tax and 35% of disputed tax
where the tax arrears relate to disputed interest or disputed penalty or disputed fee.25% of disputed interest or disputed penalty or disputed fee30% of disputed interest or disputed penalty or disputed fee

What is the manner of payment under this scheme?

The designated authority shall, within 15 days from the date of receipt of the declaration, by order, determine the amount payable by the declarant in accordance with the provisions of this Act and grant a certificate to the declarant containing particulars of the tax arrears and the amount payable after such determination.

The declarant shall pay the amount determined within 15 days of the date of receipt of the certificate and intimate the details of such payment to the designated authority in the prescribed form and thereupon the designated authority shall pass an order stating that the declarant has paid the amount.

Any amount paid in pursuance of a declaration under this scheme shall not be refundable under any circumstances.

Comments of the CBDT Chairman

The Central Board of Direct Taxes (CBDT) is a statutory authority functioning under the Central Board of Revenue Act, 1963 who deals with matters relating to levy and collection of direct taxes. It provides inputs for policy making and planning of direct taxes. It is also responsible for administration and implementation of direct tax laws.

CBDT chief P C Mody said that the policy of the government has been to reduce tax litigation apart from increasing the monetary limits at what the tax department used to file appeals. This also reduced litigation in a big way.

He also said that CBDT had also brought out beneficial circulars (in the past) and accepted court decisions saying they need not litigate further. This also brought down tax litigation and in the same series they conceived the VsV scheme so that they could put an end to legacy issues.

He said against popular expectation, the income tax slabs remained unchanged, but asserted that the latest Budget aimed at providing fair and transparent tax services to citizens. “No doubt, the expectation of people will always remain for some sort of exemption or deduction to be available in the Budget or certain rates to come down but you also recall that last year a major exercise was done in terms of reducing the tax rates and then after we had the pandemic and there was hardly any occasion to revisit that area at the given moment,” Mody said.

“So, it was thought that we would use this time to provide a better, a more efficient and effective tax administration than to have any kind of a change in the exemptions or deductions for lowering of tax rates,” he said. The important point in this Budget is that “no new taxes” were imposed unlike what has been done in some other countries, even as COVID-19 remains.

On direct taxes collection target, Mody said that the government revised and lowered the direct taxes target (for fiscal ending on March 31) for the department from Rs 13.19 lakh crore to Rs 9.05 lakh crore.

As per the scheme income tax disputes settled under it cannot be reopened in any other proceeding by the income tax department or any other designated authority. The extension of the deadline will come as relief for those individuals who want to settle their tax disputes without paying additional 10% penalty and interest. The extension will also give a breather to those individuals who were yet to do a cost-benefit analysis of the scheme and decide whether to opt for it or not.

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