What is the main objective of introducing the Income Declaration Scheme?
- AOption (a)
To unearth black money and bring it back to the system
- BOption (b)
To handle corrupt officers
- COption (c)
To acknowledge the source of corruption only
- DOption (d)
To avoid governmental process
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Correct answer
To unearth black money and bring it back to the system
Why this answer is correct
The correct answer is To unearth black money and bring it back to the system.
Key Points
- The primary objective of the Income Declaration Scheme (IDS) was to provide a one-time opportunity to all persons who have not declared their income correctly in the past to come forward and declare their undisclosed income. This initiative was specifically designed to unearth black money and integrate it back into the formal financial system of the country. Hence, the first option is correct.
- The scheme was launched by the Government of India and was operational for a limited window, starting from June 1, 2016, and closing on September 30, 2016.
- It was introduced as part of the Finance Act, 2016, under the leadership of the then Union Finance Minister Arun Jaitley.
- The scheme targeted domestic black money, allowing individuals, companies, and firms to disclose their hidden assets or income that had escaped the tax net in previous assessment years.
- By bringing this undisclosed wealth into the system, the government aimed to increase the tax base and generate revenue that could be utilized for public welfare and infrastructure development.
Additional Information
- Taxation and Penalty Structure: Under the Income Declaration Scheme, 2016, the total levy was fixed at 45% of the value of the undisclosed income. This included a tax of 30%, a Krishi Kalyan Surcharge of 7.5%, and a penalty of 7.5%.
- Immunity and Benefits: Declarants were granted immunity from prosecution under the Income-tax Act, 1961 and the Wealth-tax Act, 1957. Furthermore, the assets declared under the scheme were not subject to Wealth Tax in the future, and the Central Board of Direct Taxes (CBDT) ensured that the identity of the declarants remained confidential.
- Scope of Disclosure: The scheme allowed for the disclosure of income in the form of cash, bank deposits, real estate, gold, and other movable or immovable assets located within India.
- Comparison with PMGKY: Following the demonetization of Rs. 500 and Rs. 1,000 notes in November 2016, the government introduced the Pradhan Mantri Garib Kalyan Yojana (PMGKY), which was another opportunity for tax evaders to declare their unaccounted cash at a higher tax rate of approximately 50% and a mandatory 25% interest-free deposit for 4 years.
Important Points
- Statistical Data: At the conclusion of the Income Declaration Scheme on September 30, 2016, the government received 64,275 declarations. The total amount of undisclosed income declared through the scheme was approximately Rs. 65,250 crore.
- Revenue Impact: The scheme resulted in a potential tax collection of over Rs. 29,362 crore for the Exchequer, which significantly boosted the fiscal resources of the Union Government.
- Global Context: This move was aligned with India's commitment to the G20 and OECD guidelines to combat tax evasion and promote transparency in financial transactions.
- Administrative Authority: The Central Board of Direct Taxes (CBDT), a statutory authority functioning under the Department of Revenue in the Ministry of Finance, was the nodal agency responsible for the administration and guidelines of this amnesty-like scheme.
