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Clarifications on the Income Declaration Scheme, 2016
June, 28th 2016
                                                                  Circular No. 24 of 2016

                                Government of India
                                 Ministry of Finance
                               Department of Revenue
                             Central Board of Direct Taxes
                                    (TPL Division)
                                                                 Dated 27th of June, 2016

                 Clarifications on the Income Declaration Scheme, 2016

       The Income Declaration Scheme, 2016 (hereinafter referred to as `the Scheme')
incorporated as Chapter IX of the Finance Act, 2016 provides an opportunity to persons
who have not paid full taxes in the past to come forward and declare the undisclosed
income and pay tax, surcharge and penalty totaling in all 45% of such undisclosed income
declared. The Income Declaration Scheme Rules, 2016 (hereinafter referred to as `the
Rules') have been notified. In this regard, Circular No. 17 of 2016 dated 20th May, 2016
issued by the Board provided clarifications to 14 queries. Subsequently, further queries
have been received from the public about various provisions of the Scheme. The Board
has considered the same and the following clarifications are issued.-

Question No.1:      If only part payment of the tax, surcharge and penalty payable on
                    undisclosed income declared under the Scheme is made before
                    30.11.2016, then whether the entire declaration fails as per section
                    187(3) of the Finance Act, 2016 or pro-rata declaration on which tax,
                    surcharge and penalty has been paid remains valid?

Answer:             In case of part payment, the entire declaration made under the
                    Scheme shall be invalid. The declaration under the Scheme shall be
                    valid only when the complete payment of tax, surcharge and penalty
                    is made on or before 30.11.2016.

Question No.2:      In case of amalgamation or in case of conversion of a company into
                    LLP, if the amalgamated entity or LLP, as the case may be, wants to
                    declare for the year prior to amalgamation/conversion, then whether
                    a declaration is to be filed in the name of amalgamated entity/LLP or
                    in the name of the amalgamating company or company existing prior
                    to conversion into LLP?

Answer:             Since the amalgamating company or the company prior to conversion
                    into LLP is no more into existence and the assets/liabilities of such

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                 erstwhile entities have been taken over by the amalgamated
                 company/LLP, the declaration is to be made in the name of the
                 amalgamated company or the LLP, as the case may be, for the year in
                 which the amalgamation/conversion takes place.

Question No.3:   Whether the Scheme is open only to residents or to non-residents

Answer:          The Scheme is available to every person, whether resident or non-

Question No.4:   If undisclosed income relating to an assessment year prior to A.Y.
                 2016-17, say A.Y. 2001-02 is detected after the closure of the Scheme,
                 then what shall be the treatment of undisclosed income so detected?

Answer:          As per the provisions of section 197(c) of the Finance Act, 2016, such
                 income of A.Y. 2001-02 shall be assessed in the year in which the
                 notice under section 148 or 153A or 153C, as the case may be, of the
                 Income-tax Act is issued by the Assessing Officer. Further, if such
                 undisclosed income is detected in the form of investment in any asset
                 then value of such asset shall be as if the asset has been acquired or
                 made in the year in which the notice under section 148/153A/153C is
                 issued and the value shall be determined in accordance with rule 3 of
                 the Rules.

Question No.5:   Whether a person on whom a search has been conducted in April,
                 2016 but notice under section 153A is not served upto 31.05.2016, is
                 eligible to declare undisclosed income under the Scheme?

Answer:          No, in such a case time for issuance of notice under section 153A has
                 not expired. Hence the person is not eligible to avail the Scheme in
                 respect of assessment years for which notice under section 153A can
                 be issued.

Question No.6:   As per Circular No.17 of 2016, question No.14, it is not mandatory to
                 attach the valuation report. But Form-1 states "attach valuation
                 report". How to interpret?

Answer:          It is necessary for the declarant to obtain the valuation report but it is
                 not mandatory for him to attach the same with the declaration made
                 in Form-1. However, the jurisdictional Pr. Commissioner/
                 Commissioner in order to ascertain the correctness of the value of the

                                       Page 2 of 4
                  asset quoted in Form-1 may require the declarant to file the valuation
                  report before issuing the acknowledgment in Form-2. In such a
                  circumstance, it will be necessary for the declarant to make the report
                  available to the Pr. Commissioner/Commissioner.

Question No.7:    Is it mandatory to furnish PAN in the Form of declaration?

Answer:           Yes, PAN is the unique identifier for all direct tax purposes. This is also
                  necessary in order to claim the benefits and immunities available under the

Question No.8:    If any proceeding is pending before the Settlement Commission, can a
                  person be considered eligible for the Scheme?

Answer:           No, a person shall not be eligible for the Scheme in respect of
                  assessment years for which proceeding is pending with Settlement

Question No.9:    Land is acquired by the assessee in year 2001 from assessed income
                  and is regularly disclosed in return of income. Subsequently in the
                  year 2014, a building is constructed on the said land and the
                  construction cost is not disclosed by the assessee. What shall be the
                  fair market value of such building for the purposes of the Scheme?

Answer:           Fair market value of land and building in such a case shall be
                  computed in accordance with Rule 3(2) by allowing proportionate
                  deduction in respect of asset acquired from assessed income.

Question No.10:   Whether cases where summons under section 131(1A) have been
                  issued by the Department or letter under the Non-filer Monitoring
                  System (NMS) or under section 133(6) are issued are eligible for the

Answer:           Cases where summons under section 131(1A) have been issued by the
                  department or letters for enquiry under NMS or under section 133(6)
                  are issued but no notice under section 142 or 143(2) or 148 or 153A or
                  153C [as specified in section 196(e)] of the Finance Act, 2016 has been
                  issued are eligible for the Scheme.

                                        Page 3 of 4
Question No.11:    If notices under section 142, 143(2) or 148 have been issued after
                   31.05.2016 and assessee makes declaration under the Scheme then
                   what shall be the fate of these notices?

Answer:            As clarified vide Explanatory Circular No. 17 dated 20.5.2016 , a
                   person shall not be eligible for the Scheme in respect of the
                   assessment year for which a notice under section 142, 143(2) or 148
                   has been received by him on or before 31.5.2016. In a case where
                   notice has been received after the said date, the assessee shall be
                   eligible to make a declaration under the Scheme for the said
                   assessment year. Such declaration shall be valid if it has not been
                   made by suppression of facts or misrepresentation and the amount
                   payable under the Scheme has been duly paid within the specified
                   time. On furnishing by the declarant the certificate issued by the Pr.
                   Commissioner/Commissioner in Form-4 to the Assessing Officer, the
                   proceedings initiated vide notice under section 142, 143(2) or 148 shall
                   be deemed to have been closed.

                                                                        (Dr. T.S. Mapwal)
                                               Under Secretary to the Government of India

Copy to:-
1.  PS to FM/ OSD to FM/ OSD to MoS(R).
2.  PS to Secretary (Revenue).
3.  The Chairperson, Members and all other officers in CBDT of the rank of Under
    Secretary and above.
4.  All Pr. Chief Commissioners/ Pr. Director General of Income-tax ­ with a request to
    circulate amongst all officers in their regions/ charges.
5.  Pr. DGIT (Systems)/ Pr. DGIT (Vigilance)/ Pr. DGIT (Admn.)/ Pr. DG (NADT)/ Pr.
    DGIT (L&R).
6.  CIT (M&TP), CBDT.
7.  Web manager for posting on the departmental website.

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