All you need to know about the income tax declaration scheme

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The Centre is clearly finding it difficult to juggle its tight fiscal balance with the myriad demands for funds to pep up the economy. This state of affairs is, to a large extent, due to the ineffectiveness of tax authorities in making citizens part with their money by way of taxes.

India's tax to GDP ratio is one of the worst globally. Undeclared income has been ferreted away over the years and currently estimated to run into trillions of rupees. In yet another bid to unlock this stash, the Income Declaration Scheme (IDS) 2016, was announced in the Union Budget.

What is it?

The Centre has opened a window for those who have not declared their income correctly in earlier years, to come clean this year. While the IDS last year sought to tackle black money stashed overseas, this year’s scheme is limited to domestic income that has escaped tax. The window will remain open for four months from June 1. The declared income will be taxed at the rate of 30 per cent plus a Krishi Kalyan cess of 25 per cent on this tax, and a penalty at the rate of 25 per cent of the tax payable; thus bringing the total tax outgo to 45 per cent of the income declared.

The undisclosed sum can be held either in the form of assets or in any other form. If the taxpayer is holding undisclosed income in the form of an asset, the market value of the asset as on June 1 shall be used to compute the sum of undisclosed income. The Centre has also promised that those declaring undisclosed income will not be subject to further enquiry or scrutiny. On the other hand, if someone fails to use this opportunity, the income, if unearthed by the tax-men in subsequent years, will be subject to tax for the previous years and there could be penal actions as well.

Why is it important?The Centre is planning to collect a sizeable sum through this move; some estim