Budget 2020: Centre kicks off immunity scheme to settle income tax disputes

Waiver from interest and penalty if paid by March 31; estimated value of contested money over Rs 5 trillion

The government has introduced an immunity scheme — Vivaad se Vishwas — for five months (till June 30) for citizens to settle disputes on income tax, offering relief from a “vexatious litigation process”, said Finance Minister Nirmala Sitharaman. 

Under the proposed scheme, one is required to pay only the amount of the disputed tax — on doing so, you get complete waiver of interest and penalty, provided the payment is by March 31. For a disputed penalty, where interest and fee are not connected with the disputed tax, one is required to pay only 25 per cent of this total for settling the dispute. 

If paying after March 31, one shall be required to pay 110 per cent of the disputed tax (the excess 10 per cent shall be limited to the amount of related penalty and interest, if any) and 30 per cent of penalty, interest and fee.

This scheme is a replica of the Sabka Vishwas (Legacy Dispute Regulation) Scheme, 2019 (SVLDRS) for indirect tax litigation. The hope is that this would unlock revenue blocked in long-drawn litigation at various forums. Sources in the department say the total value at stake in these disputes would be Rs 5-6 trillion.

“Our government has taken several measures to reduce tax litigation. In the last budget, the Sabka Vishwas Scheme resulted in settling over 1,89,000  cases…This year, I propose to bring a scheme similar to this for reducing  litigation even in direct taxes,” the minister said. Adding that there are 483,000 direct tax case disputes pending at various appellate forums — commissioner (appeals), income-tax appellate tribunal (ITAT), high courts and Supreme Court. 

“This is a very interesting provision. The measure to collect taxes before March 31 by no interest or penalty on those who pay taxes on all pending disputes would be attractive for many,” felt Dinesh Kanabar, chief executive at Dhruva Advisors LLP. 

The minister also proposed “faceless” appeals, in addition to faceless scrutiny assessments. The aim is to eliminate human interface and ensure better compliance, transparency and adoption of global best practices. The objection, say experts, is that this could also lead to uncertainty, as it would do away any personal hearing.  

Besides, the Budget has proposed a charter for taxpayers and having it enshrined in the Income Tax Act. “Any tax system requires trust between payers and the administration. This will be possible only when taxpayer rights are clearly enumerated,” the minister said. 

“Having a legal framework to prevent tax-related harassment is truly welcome. It will go a long way in building investor trust and confidence,” said S R Patnaik, partner, Cyril Amarchand Mangaldas. 

To further ease the process of allotting the PAN (income tax) number, it has been decided that PAN will be allotted online instantly on the basis of Aadhaar, without one needing to fill a detailed application form. Further, the Budget rationalises the process of registration in the case of charitable Trusts, making this completely electronic. Under this, a unique registration number shall be issued to all new and existing charity institutions. Further, a new charity institution which is yet to start its activities can get provisional registration for three years.    

Improving tax administration
 

1. Further elimination of human interface through faceless appeals
2. No dispute but trust scheme, a measure to reduce direct tax litigations
3. Legal framework soon for preventing tax-related harassment
4. TCS on remittance under RBI’s LRS scheme in transaction over Rs 7 lakh
5. Dispute Resolution Panel will also deal with non-residents assessees' assessments
6. Raises the limit of tax audit to Rs 5 crore turnover from Rs 1 crore
7. Indian citizen liable to pay tax who are not resident of any country

Checking misuse high on agenda

To check the misuse of the Reserve Bank of India’s Liberalised Remittance Scheme (LRS), the Centre has proposed tax collection at source on remittances exceeding Rs 700,000 in a year and on sale of  overseas tour packages. Also, the tax on the sale of goods in excess of Rs 5 million annually by a seller whose annual turnover exceeds Rs 10 crore. This is after probe agencies had highlighted several instances of manipulations.