Income disclosure scheme

199 views 4 replies

Vinay

Student

39 Points Joined March 2010

Dear All In the recent tranche of FAQs issued on June 30, 2016 the CBDT has clarified that once the person had declared undisclosed income, no question will be asked from where such income or tax is coming from. This assurance in the lasts FAQs (Question 5) issued by dept. Will it bring down the effective tax rate from 45% to 31% on the undisclosed income? Suppose Mr. A offers his undisclosed income of Rs 290 crores under IDS. . As per the clarification no questions will be asked from where such income of Rs 200 crores has come. Similarly, the remaining income of 90 crores (290-200) from which he has paid taxes will also be treated as his legitimate income. Thus, ultimately Mr. A has paid tax of around 31% on undisclosed income of Rs 290 crores. Kindly confirm the same.

Replies (4)

CA Saurabh Singh

Practising Chartered

974 Points Joined June 2015

Hi Vinay,

The effectiv tax rate has been fixed as 45% i.e 30% base and 7.5% Krishi and 7.5% cess of undisclosed income.

Please provide the link from where you have interpreted that the tax rate would reduce to 31%

CA Saurabh Singh

Practising Chartered

974 Points Joined June 2015

Ya Vinay I got the FAQ,

Yes the Income TAx ha mentioned in their FAQ that the source of tax shall not be questioned , hence this could be used as a loop hole to reduce the effective tax rate for example :

Total Income Declared =10 lakhs

Tax payable =10 @ 45% i.e 4.5

and as source of tax is not qustioned hence total income indirectly disclosed is 14.5

thus the effective tax rate has come to 31% i.e 4.5/14..5

mohammad rasool baig

Management Consultant

1026 Points Joined August 2012

But if Mr A had disclosed an income of 290 crores then 45% will be calculated on 290 Crores but not on 200 crores right??

Vinay

Student

39 Points Joined March 2010

CBDT has clarified today in Q. No. 6 of circular 27 of 2016 dated 14/07/2016 that the effective tax rate will be 45% only. This anomaly has been cleared.