The Income Tax Department came out with a fourth set of clarifications on the Income Declaration Scheme (IDS) on queries seeking to know if payment under the Scheme can be made out of the undisclosed income without including the same in the income declared, which would bring down the effective rate of tax, surcharge and penalty payable to around 31% from 45%.
The clarification in the form of frequently asked questions (FAQs) stated that there is no intent to “modify or alter the rate of tax, surcharge and penalty payable under the Scheme which have been clearly specified in the Scheme itself”.
It said further “Sections 184 & 185 of the Finance Act, 2016 unambiguously provide for payment of tax, surcharge and penalty at the rate of 45 per cent of undisclosed income”.
It offered an illustration: A person declares Rs 100 lakh as the undisclosed income… as on June 1, 2016, but pays tax, surcharge and penalty of Rs 45 lakh (30 lakh + 7.5 lakh + 7.5 lakh) on the same out of his other undisclosed income.
“In this case, the declarant will not get any immunity under the Scheme in respect of undisclosed income of Rs 45 lakh utilised for payment of tax, surcharge and penalty, but not included in the declaration filed under the Scheme,” it added.