Vivad Se Vishwas: Tax Payout Tied To Who Filed The Appeal

Tax to be paid under the proposed amnesty law will vary depending on who filed the appeal—an individual or the tax department—under the changes cleared by the government, according to an official.

After the Finance Minister Nirmala Sitharaman tabled the Direct Tax Vivad Se Vishwas Bill, 2020 in Lok Sabha on Feb. 5, some amendments were approved by the Cabinet on Feb 12. to widen its ambit.

The scheme was introduced in the budget with an objective to resolve about 4.83 lakh direct tax appeals involving Rs 9.32 lakh crore worth of dues pending at various forums. That’s equivalent of 82 percent of the government’s direct tax revenue in FY19.

The changes to the amnesty bill specify tax, interest and penalty to be paid if an appeal is filed either by the taxpayer or the Income Tax Department, the official quoted earlier said on the condition of anonymity as details are not public yet.

In her interaction with the industry today, Finance Minister Nirmala Sitharaman said details of the amendments have been sent to lawmakers, and will be shared with the public soon.

According to the official quoted earlier, if the appeal was filed by a taxpayer:

• The individual will have to pay 100 percent of the disputed tax, and the penalty and interest will be waived till March 31, 2020. After that, 110 percent of the tax amount will have to be paid.
• In search cases involving recovery below Rs 5 crore, 125 percent of the disputed tax will have to be paid; that will go up to 135 percent after March 31.
• In case of disputed penalty or interest, the taxpayer will have to pay 25 percent till March 31 and 30 percent after that.

If the appeal was filed by the income tax department:

• A taxpayer will have to pay 50 percent of the disputed tax, and the penalty and interest will be waived till March 31, 2020. After that, the individual will have to pay 55 percent of the disputed tax.
• In search cases, 62.5 percent of tax will have to be paid by March 31 and 37.5 percent after that.
• Against penalty and interest, an individual will have to pay 12.5 percent till March 31 and 15 percent after that.

The amendments specify that for search cases, the limit of disputed tax of Rs 5 crore will be computed on a yearly basis.

It’s good that in search cases taxpayers are required to pay 125 percent of the disputed amount instead of 100 percent as they should not be treated on a par with regular disputes, said Amit Maheshwari, managing partner at Ashok Maheshwary & Associates LLP. Many such taxpayers from whom recovery of less than Rs 5 crore is made would opt for the scheme, he said.

In cases where the tax paid before filing a declaration under the Vivad Se Vishwas scheme exceeds the liability under the proposed law, the excess amount would be refunded.