Vivad Se Vishawas Scheme…which will come into effect in the year 2024, was introduced during the announcement of Budget 2024. The Finance Ministry’s initiative is aimed at simplifying the resolution of existing income tax disputes. By waiving off penalty and interest, the scheme encourages taxpayers to clear their dues by submitting a specific form and paying the disputed tax before a certain deadline.
Understand about the Vivad Se Vishawas Scheme
To increase understanding and participation in the scheme, the Central Board of Direct Taxes (CBDT) has issued a note. The purpose of this document is to answer the queries of the stakeholders and clarify the different aspects of the scheme. This appeal is applicable to a range of disputes, including writ petitions and applications for amendment under Section 264 of the Income Tax Act, which were not responded to as of July 22, 2024.
Taxpayers involved in litigation are differentiated as new or old appellants depending on the status of their cases as on January 31, 2020. The new appellants are given the opportunity to settle their disputes at more favourable rates, while the old appellants, due to the previous opportunity for resolution being sidelined, are subjected to higher rates. It encourages timely settlement of disputes under the scheme.
If both taxes and penalties do not resolve the dispute
However, the FAQs provided by the ministry have revealed problems that tax experts believe could prevent participation. Concerns have surfaced about technical challenges and perceived difficulties related to refund adjustments, appeal eligibility for cases already settled, and the status of taxpayers whose assessments are pending for appeal. These issues point to potential obstacles that could undermine the effectiveness of the plan.
The scheme lays down the payment requirements, including cases where the Income Tax Authority has initiated an appeal or where the taxpayer has received the correct decision from the Higher Appellate Authority. In particular, if both the tax and the penalty do not resolve the dispute, the penalty amount can be waived. Nevertheless, from January 1, 2025, an additional 10% fee will be levied on the settlement amount, which will add a time-sensitive element to the plan.
Some disputes are excluded from the scheme, such as search operations, undeclared foreign assets, or any matter related to crimes or information obtained from international agreements. The Direct Tax Dispute to Faith scheme aims to streamline the settlement of tax litigations, its success depends on addressing the concerns raised by the tax professional.
