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The Direct Tax Vivad se Vishwas Scheme, 2024 (“VSV Scheme, 2024”) has been proposed in the Finance (No. 2) Bill, 2024.
The VSV Scheme, 2024 has been proposed with the objective of reducing pending income tax litigation and provides for a dispute settlement mechanism pursuant to which eligible taxpayers can settle their pending tax disputes by paying a specified portion of the tax arrears. It is noteworthy that the provisions of the VSV Scheme, 2024 are largely aligned with the Vivad se Vishwas Scheme of 2020 (“VSV Scheme, 2020”). The note provides an overview of the VSV Scheme, 2024.
Eligibility for the VSV Scheme, 2024
The following taxpayers are eligible to opt for the VSV Scheme, 2024:
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- Taxpayers in whose case an appeal, writ petition or special leave petition (whether filed by such taxpayer or by the income-tax authorities) is pending before Commissioner of Income Tax (Appeals) (“CIT(A)”) or Income Tax Appellate Tribunal (“ITAT”) or High Court or Supreme Court (collectively referred to as “Appellate Forums”) as on July 22, 2024.
- Taxpayers who have filed objections against the draft assessment order before the Dispute Resolution Panel (“DRP”) under section 144C of the Income-tax Act, 1961 (“IT Act”) and the DRP has not issued any directions to the Assessing Officer (“AO”) on or before July 22, 2024.
- Taxpayers in whose case the DRP has issued directions to the AO under section 144C(5) of the IT Act and the AO has not passed the final assessment order on or before July 22, 2024.
- Taxpayers who have filed revision application under section 264 of the IT Act and such application is pending as on July 22, 2024.
Tax payable under the VSV Scheme, 2024
A taxpayer may opt for the VSV Scheme 2024 by paying the amount computed as follows:
| Scenario 1: In cases where the pending appeal / writ petition / special leave petition / draft assessment order of AO / directions from DRP / revision application (hereinafter referred to as “Pending Case”) is related to “Disputed Tax” (defined below) (and interest and penalty on such Disputed Tax) and such Pending Case was filed after January 31, 2020 but on or before July 22, 2024. | |
| Amount payable, if VSV Scheme, 2024 opted on or before December 31, 2024 | Amount payable, if VSV Scheme, 2024 opted after December 31, 2024 and before the last date (yet to be notified) |
| 100% of the Disputed Tax
Note: Entire interest and penalty on Disputed Tax will be waived. |
110% of Disputed tax
Note: Entire interest and penalty on Disputed Tax will be waived. |
| Scenario 2: In case where the Pending Case is related to Disputed Tax (and interest and penalty on such Disputed Tax) and such Pending Case was filed on or before January 31, 2020 at the same Appellate Forum as is pending at present. | |
| Amount payable, if VSV Scheme, 2024 opted on or before December 31, 2024 | Amount payable, if VSV Scheme, 2024 opted after December 31, 2024 and before the last date (yet to be notified) |
| 110% of the Disputed Tax
Note: Entire interest and penalty on Disputed Tax will be waived. |
120% of Disputed Tax
Note: Entire interest and penalty on Disputed Tax will be waived. |
| Scenario 3: In case where the Pending Case is related to “Disputed Interest” or “Disputed Penalty” or “Disputed Fee” (each, as defined below) and such Pending Case was filed after January 31, 2020 but on or before July 22, 2024. | |
| Amount payable, if VSV Scheme, 2024 opted on or before December 31, 2024 | Amount payable, if VSV Scheme, 2024 opted after December 31, 2024 and before the last date (yet to be notified) |
| 25% of the Disputed Interest or Disputed Penalty or Disputed Fee, as the case maybe | 30% of the Disputed Interest or Disputed Penalty or Disputed Fee, as the case maybe |
| Scenario 4: In case where the Pending Case is related to Disputed Interest or Disputed Penalty or Disputed Fee and such Pending Case was filed on or before January 31, 2020 at the same Appellate Forum as is pending at present. | |
| Amount payable, if VSV Scheme, 2024 opted on or before December 31, 2024 | Amount payable, if VSV Scheme, 2024 opted after December 31, 2024 and before the last date (yet to be notified) |
| 30% of the Disputed Interest or Disputed Penalty or Disputed Fee, as the case maybe | 35% of the Disputed Interest or Disputed Penalty or Disputed Fee, as the case maybe |
| 1. “Disputed Tax” means the tax payable if the taxpayer looses the appeal / writ / special leave petition or the DRP confirms the variation proposed in the draft assessment order or the AO passes the final assessment order in pursuance of directions of DRP or the CIT rejects the revision application.
2. “Disputed Interest” means the interest determined under the IT Act (excluding interest chargeable on Disputed Tax) is respect of which an appeal has been filed by the taxpayer. 3. “Disputed Penalty” means the penalty determined under the IT Act (excluding penalty chargeable on Disputed Tax) is respect of which an appeal has been filed by the taxpayer. 4. “Disputed Fee” means the fee determined under the IT Act is respect of which an appeal has been filed by the taxpayer. |
Further, it is imperative to note that in the following scenarios only 50% of the amount payable in the Table above shall be payable for availing the VSV Scheme, 2024:
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- Where the Pending Case has been filed by the Income-tax Authorities.
- Where an appeal / objection has been filed before the CIT(A) / ITAT / DRP and an order in favor of the taxpayer has been received on any issue pending in the said appeal / objection from the higher Appellate Forums (and such decision has not been reversed).
Procedure under the VSV Scheme, 2024
The procedure for availing the VSV Scheme, 2024 is as under:
Filing of declaration
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- Taxpayer shall file a declaration furnishing such details as may be notified before the Designated Authority. “Designated Authority” means a tax officer not below the rank of CIT as notified by the Principal Chief CIT.
- Upon filing of the declaration, any appeal pending before the CIT(A) or ITAT in respect of tax arrears shall be deemed to have been withdrawn from the date of issuance of certificate by Designated Authority (as discussed in “Time and manner of payment” section below).
- Where taxpayer has filed an appeal before any Appellate Forum or any writ petition before High Court or Supreme Court, the same shall, wherever required, be withdrawn by him.
- Further, the taxpayer shall furnish an undertaking waiving his right to seek any remedy in relation to the tax arrears.
Time and manner of payment
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- The Designated Authority shall within a period of fifteen (15) days from the date of receipt of declaration, grant a certificate containing particulars of tax arrears and amount payable.
- The taxpayer shall make payment of amount determined above within fifteen (15) days of the date of receipt of certificate and intimate the same to the Designated Authority.
Cases not covered under the VSV Scheme, 2024
The VSV Scheme, 2024 will not apply in the following cases:
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- Where assessment has been made on the basis of the search initiated under section 132 or 132A of the IT Act.
- Where prosecution under the IT Act or any other specified act has been instituted on or before the date of filing declaration by the taxpayer.
- Where there is undisclosed income from a source located outside India or undisclosed asset outside India.
- Where assessment or reassessment has been made based on the information received under Double Taxation Avoidance Agreement.
- Where an order of detention has been made under the provisions of Foreign Exchange and Prevention of Smuggling Activities Act, 1974 on or before the date of filing of declaration and the same has not been revoked or set aside in specified circumstances.
- Where the taxpayer has been notified under section 3 of the Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992 on or before the date of filing of declaration.
Other features of the VSV Scheme, 2024
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- Making a declaration under the VSV Scheme, 2024 would not amount to conceding to the tax position by the taxpayer.
- The taxpayer would be granted immunity from initiation of any proceedings (including prosecution proceedings) or imposition of any penalty or interest under any provisions of the IT Act in respect of tax arrears for which VSV Scheme, 2024 has been availed.
In view of the introduction of the VSV Scheme, 2024, taxpayers should consider reviewing their pending income-tax litigation and based on the likelihood of success and estimated cost of continuing the litigation, decide whether to opt for the VSV Scheme, 2024.
Authors: Sumit Bansal (Partner),Shivani Chhabra (Tax) and Ankur Kishanpuria (Tax)