Vivad se Vishwas scheme introduced to settle income tax disputes

Source: Business Standard

To provide a procedure for taxpayers to settle pending income tax disputes, Vivad se Vishwas scheme was announced in the Union Budget 2020. Under the scheme, taxpayers will be able to pay half of the disputed amount in cases where the appeal has been filed by the Income Tax Department.

The Direct Tax Vivad Se Vishwas Bill was later introduced in the Lok Sabha. The Union Cabinet recently approved some amendments to the Bill, which are expected to be taken up into consideration before the passage of the Bill. The Lok Sabha will resume its budget session early next month.

Two kinds of appeals to be covered

The Bill is expected to cover two kinds of appeals – those filed by taxpayers and those filed by the I-T Department (or when the Department lost a case). For the first kind of appeal, if the payment is made by March 31, the declarant will be required to pay the full amount of the disputed tax. If a case is related to search, 125% of the disputed tax needs to be paid. However, no interest or penalty is required to be paid. If the dispute case is only related to penalty, interest or fee, only 25% of it needs to be paid.

Under the second kind of appeal, the amount will be halved if the payment is made by March 31. In this case, the declarants need to pay 50% of the disputed tax or 62.5% in cases related to searches. No interest or penalty needs to be paid. If the matter is related to only interest, penalty or fee, the declarants will need to pay only 12.5% of it.

But, if the payment is made after March 31 but by June 30, under the first type of appeal, the declarant will need to pay 110% of the disputed tax and 135% if the case is related to searches. The penalty and interest will be applicable. If the dispute is only related to penalty, interest or fee, then 30% of it needs to be paid.

In the case of the second kind of appeal, if the payment is made after March 31 but by June 30, the declarant will need to pay 55% of the disputed tax or 67.5% if its search-related case. No interest or penalty is needed to be paid. If the case is only related to penalty, interest or fee then 15% of it will be required to be paid.