The Finance Ministry has announced the launch of the second edition of the Direct Tax Vivad Se Vishwas Scheme 2024 (VSV 2.0), effective October 1, 2024. This initiative aims to reduce ongoing litigations related to income tax, following the success of its predecessor.
In a notification issued by the ministry, it was confirmed that VSV 2.0 will enable taxpayers and the Income Tax Department to resolve disputes through a streamlined appeals process. Finance Minister Nirmala Sitharaman highlighted the scheme's importance in her budget speech, stating it will provide a mechanism for filing appeals across various appellate forums, including the Joint Commissioner of Income-tax (Appeals), the Income Tax Appellate Tribunal (ITAT), and higher courts.
Background and Success of VSV 1.0
The previous iteration, the Direct Tax Vivad Se Vishwas Act 2020 (VSV 1.0), was introduced to address a backlog of direct tax appeals that had massed over the years. Before its implementation, approximately 483,000 appeals were pending, locking ₹4.96 trillion in tax amounts. VSV 1.0 successfully resolved around 146,000 appeals approximately 30% - collecting ₹0.54 trillion for the government while forgiving ₹0.45 trillion in taxes.
Objectives and Mechanism of VSV 2.0
The primary goal of VSV 2.0 is to provide a cost-effective mechanism for settling disputed issues, thereby alleviating the burden of litigation on taxpayers and the judicial system. The scheme covers appeals, writ petitions, and special leave petitions pending as of July 22, 2024, and will waive penalties and interest for settlements, ensuring no prosecution will be initiated for cases resolved under the scheme.
However, certain cases are excluded from eligibility, including those involving searches, prosecutions, and undisclosed foreign income. Taxpayers under specific legal restrictions or serious offenses will also not benefit from the scheme.
Conclusion
As the October launch date approaches, stakeholders are encouraged to review their pending disputes to determine eligibility under VSV 2.0. This initiative promises to streamline the resolution process for tax disputes, reflecting the government's commitment to enhancing taxpayer services and reducing litigation costs.
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